California Public Agency Labor & Employment Blog

California Public Agency Labor & Employment Blog

Useful information for navigating legal challenges

Trouble-Shooting the Hiring Process for a Public Agency

Posted in Hiring

This post was authored by David Urban.

The stock market is at all-time highs, and unemployment and inflation are low. For many California public sector employers, the strengthened economy means more hiring.  Although this is good news, the hiring process does carry legal risks, just as did downsizing and other similar matters in bad economic times.

Here are six areas of the hiring process in the public sector that deserve particular attention from a legal perspective.  This is not an exhaustive list of such areas, or a complete list of considerations, but it provides a general framework for what to trouble-shoot before hiring begins in earnest.

  1. Utilize Accurate Job Descriptions: At the very outset of the hiring process, it is critical to develop accurate and sufficiently detailed job descriptions.  These will prove important not only for hiring, but also for legal issues that may arise later during the course of the employment relationship.  An accurate job description will help the agency demonstrate that questions on job applications and during interviews are legitimate and non-discriminatory, and help those in the hiring process focus on eliciting those facts that are job-related.  Also, in the context of disability discrimination laws, in both the hiring process and during employment, an agency’s identification of the “essential functions of the job” will be critical.  Under both federal and state law, a court will treat the job description prepared by the employer prior to advertising or interviewing for the job as evidence of what constitute essential functions.

Detail in the job description can also be very important, because vague or overly general job descriptions may not provide proper guidance either to applicants deciding whether to seek the job, or to agency personnel making the hiring decisions. Misunderstandings about the nature of the job can produce charges of discrimination or of failure to accommodate.  At a minimum, a job description should contain: (a) justifiable job-related educational requirements, (b) necessary vocational skills, (c) required work experience, (d) examples of duties, (e) unusual physical requirements, (f) work hours, and (g) compensation.  Where possible, job requirements should be validated by experts using professionally accepted validation methods.

  1. Establish a Uniform Screening Process for Applications: The next phase to consider is the initial “screening” of applications for those who are not qualified or not competitive in light of the quality and experience of other applicants.  As a general matter, an employer’s initial “screening” must be conducted in a neutral manner that does not result in an unjustifiable disproportionate impact with regard to a protected characteristic, such as race, gender, religion, and age over 40.  Accordingly, the agency should establish a set of job-related screening criteria which do not result in exclusion of individuals who are qualified and competitive for the job.  The agency should also have a process in place to make a separate review of the fairness and appropriateness of screening criteria, to make sure the screening guidelines are followed uniformly, and to confirm that decisions were not influenced by improper considerations.
  2. Focus Interviews on Job-Related Questions, and Avoid Improper Questions: Like other aspects of the hiring process, interviews must be conducted in a non-discriminatory manner.  Questions should focus on qualifications for the job in question, and not pertain to protected characteristics.  Some unlawful questions are straightforward, such as asking about an applicant’s race, age, religion, or other protected characteristics.  But according to the Department of Fair Employment and Housing (“DFEH”), the list also encompasses some questions that bear indirectly on these matters, such as questions about the date of completion of school, religious days the applicant observes, or the applicant’s birthplace.  There are, however, ways questions can be phrased to request information the employer legitimately needs without creating an impression of bias.  (For example, it would be appropriate to ask which languages an applicant speaks, but only if relevant to the job at issue.)

It is vital that agencies ensure that those employees conducting interviews have received training in what constitute protected classifications, and what questions are prohibited. Also, interviewers should be thoroughly familiar with the job description and the nature of the job in question.

  1. Background Investigations, Including Reference Checks: Background investigations pose unique legal challenges.  To fill some positions such as police officer, a public agency is actually required by law to conduct such an investigation.  However, applicants have state and federal constitutional privacy rights that bear on what information an agency can seek and in what manner the information may be sought.  Also, an agency must be careful to abide by the same anti-discrimination standards in conducting the background investigation that are required in all other aspects of the hiring process.  Further, there are federal and state statutes that may govern how the investigation is conducted.

An important step in the background investigation process is obtaining a signed waiver and authorization from each selected applicant.  The waiver/authorization should inform the applicant of the types of information the agency will request from the applicant’s current or former employers.  It should also require the applicant to release the agency and current or former employers from liability arising from the background investigation.  The document can also require the applicant to authorize access to, and/or to require the applicant to obtain a copy of, the applicant’s personnel file from prior employers.  It may be appropriate for the investigator actually to meet with the applicant to explain the process and make sure the applicant fully understands what types of information the agency will seek.

  1. Keep Pre-Offer and Post-Offer Separate: Generally, under both federal and state law, employers cannot ask questions about disabilities or require medical examinations prior to making a conditional offer of employment.  The EEOC has described that a “conditional offer of employment” is a real job offer that is made after the employer has evaluated all relevant and lawful non-medical information which could reasonably have been obtained and analyzed prior to making the offer.  The offer is conditioned upon acceptable medical information, such as passing a job-related medical examination that is directly related to job performance and business necessity.  Typically, for a conditional job offer to be “real,” an employer cannot conduct medical examinations or otherwise elicit medical information until after the employer has evaluated all relevant non-medical information, and offered employment subject only to the medical exam.

Agencies should audit their practices to ensure they comply with these requirements. In the case of peace officers, agencies can sometimes make conditional offers before some types of non-medical evidence (i.e., background checks) has been received, if the evidence cannot reasonably have been collected earlier.  This, however, is an exception to the general rule.  In addition, the agency should be able to prove that the medical inquiries it makes post-offer, including psychological evaluations, which are often conducted for public safety positions, are in fact necessary for determining whether the applicant can perform the job.  (There are also considerations regarding drug tests and the limits applicable law places on them.)

  1. Rejection of Applicants Based on Results of Medical ExaminationIf an agency rejects an applicant based on the results of a medical examination, it must be prepared to present evidence that the decision comports with state and federal laws prohibiting discrimination on the basis of disability.  Considerations include whether a reasonable accommodation was available that would not impose an undue hardship, the extent to which the applicant’s holding the position would pose a direct threat to health or safety of the applicant or others that could not be eliminated by reasonable accommodation, and others.  How an agency plans to respond to charges of disability discrimination can be addressed largely in advance, by thoroughly vetting the criteria and decision making process to be used.

* * * *

Although the areas of federal and state law involved can be complex, auditing and trouble-shooting the process at the outset, and making sure that the best possible procedures are in place before they begin to operate, can help avoid legal problems later.

California Court of Appeal Issues A Contrary Decision Addressing “Vested Rights” of Public Employees in the Aftermath of PEPRA: Where Will the Supreme Court Land?

Posted in Pension, Retirement

This post was authored by Frances Rogers and Brett A. Overby

A California Court of Appeal recently issued a decision with implications that can affect all public employers in California and in contrast to a decision by another Court of Appeal just over a year ago.  The decision issued in Alameda County Deputy Sheriff’s Assn. v. Alameda County Employees’ Retirement Assn. on January 8, 2018 addressed the issue of whether pension systems governed by the County Employees Retirement Law of 1937 (CERL) can apply changes to compensation earnable under the Public Employee Pension Reform Act of 2013 (PEPRA) for employees hired before PEPRA’s January 1, 2013 effective date.  In addition, the Court addressed the Constitutional protections afforded, and the limits of, “vested rights” to immutable pension benefits.  CERL and CalPERS employers take notice.

Public Employee Pension Reform Act of 2013

Governor Jerry Brown signed PEPRA (AB 197) into law to address the significant, statewide underfunding of public pension systems. PEPRA, among other things, amended the pension systems governed by CERL.  Most significantly, PEPRA added express exclusions to CERL’s long-standing definition of compensation earnable, codified at Government Code section 31461, for those hired prior to PEPRA’s effective date (“Legacy Members”).

In response, Alameda County Employees’ Retirement Association (ACERA), Contra Costa Employees’ Retirement Association (CCCERA), and Merced County Employees’ Retirement Association (MCERA) (collectively, “Boards”) excluded certain previously included pay items from compensation earnable for Legacy Members in compliance with PEPRA.

Trial Court Decision in Alameda

Subsequently, labor organizations representing employees of CERL systems in Alameda, Contra Costa, and Merced Counties each filed writs of mandate challenging the constitutionality of the Boards’ exclusion of previously included pay items from compensation earnable. The petitioners alleged that the Legacy Members had a “vested right” to pension benefits under pre-PEPRA law and the Board violated the state and federal contract clauses in the respective Constitutions by altering their vested rights.  The three lawsuits were consolidated into one action.  In separate judgments for each of the three Boards, the trial court denied the petitioners’ request to declare the new section 31461 an unconstitutional impairment of the Legacy Members’ vested rights except to the extent the revised statute excluded the value of certain on-call payments from the Legacy Members’ compensation earnable.  In addition, the trial court made findings on the inclusion of certain compensation items in the compensation earnable of Legacy Members.  Numerous parties on both sides filed Notices of Appeal.

First District Court of Appeal Review

The First District Court of Appeal granted review in one consolidated action. The Court addressed (1) whether retirement boards have discretion to include pay items in compensation earnable not listed in CERL’s statutory categories; (2) whether the PEPRA amendment to Government Code section 31461 modified CERL or merely clarified existing law; (3) whether the Boards are bound by a Settlement Agreement to include terminal pay in compensation earnable for Legacy Members; and (4) whether PEPRA unconstitutionally impaired Legacy Members vested pension rights.

A CERL Retirement Board’s Discretion on Compensation Earnable

First, the Court held that retirement boards do not possess discretion to include additional pay items in compensation earnable beyond those includable under the CERL. An item of compensation is not includable in a member’s pensionable compensation if it fails to fall within one of CERL’s statutory compensation categories.

Interpretation of PERPA’s Statutory Changes

Second, the Court made several determinations regarding the interpretation of the express exclusions in PEPRA’s amendment to section 31461 and addressed whether those exclusions modified CERL or merely clarified existing law. The Court found that PEPRA did not change existing law regarding in-service leave cash-outs and that all leave cashed out during the final compensation period must be included in compensation earnable, regardless of when the underlying leave accrued.  In addition, the Court held that PEPRA’s express exclusion of terminal pay from compensation earnable was not a change in existing CERL law because CERL has always required that final compensation be payable during the final compensation period to be included in compensation earnable.  Furthermore, the Court found that PEPRA’s express exclusion of on-call and standby pay from compensation earnable was a change in existing law because both were includable in pensionable compensation before PEPRA.  Finally, the Court held that PEPRA’s express exclusion from compensation earnable of “any compensation determined by the board to have been paid to enhance a member’s retirement benefit” is a change to prior CERL law because the provision potentially excludes numerous types of pay.  Ultimately, the Court determined that PEPRA made some substantive changes to CERL with respect to on-call and standby pay and pension enhancements.

Revisiting the Impact of the Ventura Settlements

Third, the Court of Appeals addressed whether to require the Boards to continue including terminal pay in compensation earnable for Legacy Members pursuant to a Settlement Agreement executed after the 1997 decision in Ventura County Deputy Sheriffs’ Assn. v. Board of Retirement.  The Court of Appeals found that the Boards made precise and explicit promises to these Legacy Members regarding what their CERL pension included and the Legacy Members organized their work lives in reliance on those promises.  Accordingly, the Court of Appeals held that the Boards are bound by the Post-Ventura Settlement Agreements and all Legacy Members are entitled to include terminal pay in compensation earnable to the limited extent such pay was designated as pensionable by their relevant Post-Ventura Settlement Agreement.

Vested Right to Immutable Pension Benefits

Finally, having determined that PEPRA modified CERL with respect to on-call and standby pay and pension enhancements, the Court addressed whether these modifications unconstitutionally impaired the vested pension rights of Legacy Members. In doing so, the Court analyzed the First District Court of Appeals decision in Marin Assn. of Public Employees v. Marin County Employees’ Retirement Assn. issued in 2016 and which is now pending before the state Supreme Court.  Specifically, the Marin decision held that public pension system members are not entitled to an immutable, unchanging pension benefit for the entirety of employment, but are entitled only to a “reasonable” pension.  The Marin court further held that detrimental pension modifications need not always be accompanied by comparable new advantages.  The Marin court focused heavily on the “dire financial predictions necessitating urgent and fundamental changes to improve the solvency of various pension systems” in concluding that PEPRA’s modifications to the CERL definition of compensation earnable for Legacy Members was “reasonable” and therefore, did not impair Constitutionally protected vested rights.

In analyzing various state Supreme Court decisions, the Alameda Court declined to follow Marin, concluding that the Court could not engage in the individualized balancing test mandated by the Supreme Court’s vested rights jurisprudence using the Marin decision.  Ultimately, the Alameda Court found that applying detrimental changes to the pension benefits of Legacy Members is only justified by compelling evidence that the required changes manifest a material relation to the successful operation of the pension system.  The Court determined that this analysis must be done on an individualized basis.  Therefore, the Court remanded the lawsuits back to the trial court to undertake that individualized analysis for each of the three retirement systems.

The Future of Alameda, Marin & Vested Rights Jurisprudence

The state Supreme Court granted review of the Marin case on November 22, 2016, but put the case in abeyance until the First District Court of Appeals reached a decision in the Alameda County case, presumably in order to consolidate both cases should the Supreme Court grant review of the Alameda decision.  However, given the remand to the trial court, it is unclear if, procedurally, the state Supreme Court could potentially review the Alameda decision, in conjunction with its review of the Marin decision, in the near future.  Suffice it to say, we now have two divergent decisions on the fundamental notion of a vested right to immutable pension benefits in the aftermath of PEPRA.

In the meantime, all eyes are currently turned toward the pending state Supreme Court case in Cal Fire Local 2881 v. California Public Employees’ Retirement System where the Court will again consider the so-called “California Rule” which is, generally, the notion that a public employee is vested in the pension benefit promised at the start of employment such that those benefits cannot be modified even for prospective service. That case concerns PEPRA’s termination of the ability of CalPERS members to purchase unqualified service credit (i.e., “airtime”), but the decision may very well have implications for all pension benefits in general, including those at stake in Marin and Alameda

Accordingly, all public employers should be aware of the ever-changing analysis on this issue.

 

ACA Reporting Relief – Written Statement to Covered Individuals Now Due March 2, 2018; Good Faith Penalty Relief Extended

Posted in Employment, Healthcare

This post was authored by Erin Kunze and Heather DeBlanc.

1. Written Statement to Covered Individuals Now Due March 2, 2018 for the 2017 Calendar Year Reporting Period

The Internal Revenue Service (IRS) has issued an automatic, 30-day extension for applicable large employers to furnish IRS Forms 1095-B and 1095-C to covered individuals.  For the 2017 reporting period, these forms are now due to individuals on March 2, 2018, rather than January 31, 2018.

Internal Revenue Service (IRS) regulations require applicable large employers (those with 50 or more full-time equivalent employees ) to file information returns and a transmittal to the IRS (Forms 1094-C and 1095-C) reporting the health coverage the applicable large employer offered to its ACA full-time employees each calendar year.  IRS regulations also require employers who offer self-insured health plans (plans where the employer pays claims, not just premiums) to file information returns and a transmittal to the IRS (Forms 1094-B and 1095-B) reporting the covered participants.  The required forms (1094-B or 1094-C, and 1095-B or 1095-C) are due to the IRS on or before February 28th (or March 31st if filing electronically) each year.   The IRS has not yet extended this deadline.

In connection with these filings, the IRS requires the employer filing the returns to furnish the responsible individual identified on the return with a written statement regarding coverage each calendar year (Form 1095-B or 1095-C).  This can be a copy of the Forms the employer intends to file with the IRS.  These written statements (or copies of the Forms to be filed) must be furnished to covered individuals on or before January 31st of each year following the calendar year to which the statement relates.

However, as in prior years, the IRS has extended the due date for furnishing these written statements (or copies of IRS Forms 1095-B and C) to covered individuals by 30 days.  Thus, for the calendar year ending December 31, 2017, employers that are required to furnish individuals with a Form 1095 will have until March 2, 2018 to do so.

Notably, this extension eliminates an employer’s ability to request a 30-day extension for furnishing information to individuals.  Thus, the new deadline is inflexible.  In addition, the extension does NOT apply to those forms an employer is required to file with the IRS. This means that Form 1094 (B or C) and Form 1095 (B or C) will still be due to the IRS on or before February 28th (or March 31st if filing electronically), unless the employer applies for an extension of time under normal extension rules.

2. Good Faith Penalty Relief Extended for Incorrect or Incomplete Information Returns and Statements to Covered Individual

As in prior years, the IRS has also granted short-term penalty relief for those reporting entities that can demonstrate they made good-faith efforts to comply with information-reporting requirements, both to individuals and for filing with the IRS, reported on a return or statement.  Importantly, this relief applies only to those entities that file or provide individuals with incorrect or incomplete information reports.  It does not apply to those entities that do not make a good-faith effort to comply with IRS reporting regulations, or to those that fail to timely file or furnish a statement or return altogether.   To determine “good faith,” the IRS will consider what steps the employer took to reasonably prepare for reporting and furnishing information, and what steps the employer is taking to ensure compliance with reporting requirements for 2018.

For further detail regarding the extension of relief provided by the IRS, see IRS Notice 2018-06.

Performance Evaluations: Why It’s A Good Thing For Public Employers

Posted in Personnel Issues, Workplace Policies

In the corporate world, the practice of giving annual performance reviews to employees has come under attack in recent years.  Leading business magazines and newspapers have printed articles advocating for the elimination of performance evaluations.  There are even books in the marketplace that teach companies how to get rid of performance reviews.  Among the reasons for eliminating annual evaluations is that the process is a waste of time, bad for morale, and unnecessarily creates conflicts between employees and supervisors.  So, if private employers are moving towards eliminating annual evaluations, should public employers also do away with them?

The short answer is “no.”  The primary reason for this is the difference between private and public employment.  Generally, private sector employees are “at-will” meaning they can be terminated at any time without notice and for any non-discriminatory reason or no reason at all.  By contrast, public employees usually have a vested right to continued employment and this property right cannot be taken away without first being afforded certain procedural safeguards pre- and post-discipline.  These due process protections place the burden on public employers to show there are factual grounds for the discipline and that the level of discipline is appropriate.  One way public employers can satisfy this burden is by using performance evaluations.  Therefore, it is critical that public employers continue the practice of giving annual performance reviews.

Now, in fairness to proponents of getting rid of annual evaluations, those proponents do not support giving no feedback at all on employee performance.  They also recognize the employer’s need to motivate, direct and improve employee performance.  Rather, they are encouraging employers to replace the annual review with “check-in” meetings that occur throughout the year where supervisors can regularly discuss the employees’ performance and what is needed from them.  We agree with this approach and train employers that regular “check-ins” should be part of an on-going process of assessing employee performance throughout the entire year that culminates in the employee’s annual performance evaluation.  In other words, the annual evaluation is the final chapter in a year-long review process.

Another fair criticism of annual evaluations from critics is that they are ineffective because they are usually poorly written.  Some supervisors view annual performance evaluations with dread because they are time consuming or because the supervisors are uncomfortable with having to honestly assess employees.  Consequently, it is no surprise that written evaluations can fall short.  The following are a few tips for giving effective annual evaluations:

Observe Employees’ Performance During the Entire Evaluation Period

The evaluation should reflect performance over the entire evaluation period, not just the few weeks or months before the evaluation is given to the employee.  This makes it important for supervisors to observe and assess the employee’s performance throughout the year and keep a record of it.  As these observations are being made, supervisors should also make it a point to address performance issues with the employee as they arise.  Not only is it important to raise performance deficiencies with the employee as they come up, but supervisors should also make a point of praising employees when they do a good job.

Use S-P-I-R-I-T When Writing the Evaluation

The comments in the evaluation should be written with S-P-I-R-I-T.  This means that the comments should be Specific, have Purpose, and identify specific performance Incidents that the employee did well and where improvement is needed.  Where misconduct has occurred, the comments should also reflect workplace Rules that were violated and the Impact the performance problems have caused to the employer, other employees and/or members of the public.  Finally, the Timelines for giving evaluations in your agency’s rules should be followed.

Make Time to Meet with the Employee to Go Over the Evaluation

After the evaluation is written, supervisors should meet with each employee to discuss the evaluation.  Too often, employees complain that their supervisors just give them their evaluations to review on their own.  This is a poor practice.  Successful personnel management requires effective communication.  Therefore, supervisors should make time to meet with employees, provide honest and constructive feedback, recognize accomplishments, and develop a plan for improvement, if necessary.

For more tips on writing performance evaluations see our workbook on Evaluation and Discipline.

Navigating the Hazy World of Recreational Marijuana Use Following Proposition 64’s Passage

Posted in Constitutional Rights, Employment, Legislation, Workplace Policies

Last year, California voters passed Proposition 64 (“Prop 64”), making the recreational use and sale of marijuana generally permissible under California law.  Specifically, Prop 64 legalizes the use of marijuana for non-medical reasons by adults age 21 and over.  While Prop 64 made the use of recreational marijuana legal under state law as of November 9, 2016, it only directs the State of California to begin issuing business licenses for the sale of recreational marijuana beginning January 1, 2018.  Federal law still prohibits possession of marijuana, whether for recreational or medicinal purposes.

On January 1, 2018, the first State-issued licenses will take effect for sales to recreational users.  However, the new law provides cities and counties the authority to regulate recreational marijuana businesses, including by banning such businesses in their jurisdictions altogether.  Thus, the effectiveness of state licenses may vary from region to region within the state.  Several major California cities, including Los Angeles, San Francisco, San Diego, Oakland, and San Jose have already approved regulations permitting sales within their jurisdictions.  Other cities, including Riverside, Fresno, Bakersfield, Pasadena, and Anaheim have elected to prohibit recreational sales, either permanently or temporarily.

While cities and counties may regulate the sale of recreational marijuana, regulating its usage is within the State’s purview.  This appears to means that a resident of a city that bans the sale of recreational marijuana may not be able to buy (or even grow) the product within his or her home city, but he or she will be able to buy the product elsewhere and consume it in a private home within that city’s boundaries (See Health & Safety Code sections 11362.1 and 11362.2(b)).

Given the ability of a private citizen, age 21 and older, to now legally use recreational marijuana throughout the State, Prop 64 raises many issues for employers that currently implement drug free work place policies and drug testing programs.

Does Prop 64 Change an Employer’s Ability to Regulate Marijuana Usage in the Workplace?

Proposition 64 does not change the status quo regarding the enforcement of drug free workplace policies and testing programs.  In fact, the language in Prop 64 specifically provides that Prop 64’s amendments shall not

[B]e construed or interpreted to amend, repeal, affect, restrict, or preempt: . . . The rights and obligations of public and private employers to maintain a drug and alcohol free workplace or require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growth of marijuana in the workplace, or affect the ability of employers to have policies prohibiting the use of marijuana by employees and prospective employees, or prevent employers from complying with state or federal law.

This critical language was included in Prop 64 in order to ensure that employers are able to maintain or create their own policies regarding their employees’ marijuana use.

Therefore, even after Prop 64’s passage, all employers may still prohibit employees from possessing, using, or being under the influence of drugs, including marijuana, in the workplace, while on the employer’s premises; while operating employer-owned equipment; while driving employer-owned vehicles; when attending functions or events as a representative of the employer; or while in uniform.

Furthermore, “safety sensitive” employees can still be subject to random drug testing, and those testing requirements and potential consequences of positive testing remain unchanged.  All other classes of employees continue to be subject to testing based on the “reasonable suspicion” standard, post-accident, or return to duty situations as addressed in many employer policies.  The reasonable suspicion standard likewise applies to searches of an employee’s work area.  What constitutes reasonable suspicion will depend in part on how that phrase is defined by an employer’s drug testing policy.

Employers should consider reviewing current personnel policies and MOUs to determine whether they need to be updated in order to explicitly state the employer’s expectations regarding the possession and use of marijuana in the workplace.  Employers may also want to indicate in such policies that California law does not legalize recreational marijuana for individuals under the age of 21, public consumption of marijuana or driving while under the influence of marijuana.

Do Employers Now Have to Accommodate the Use of Marijuana for Medical Reasons?

Despite changes to state law, federal law remains unchanged.  Marijuana is still considered a “Schedule I” drug under the federal Controlled Substances Act.  This means that under federal law, including the Americans with Disabilities Act (“ADA”), employers are not required to accommodate “illegal” drug use, including marijuana usage.

While the status of an employer’s obligation to accommodate marijuana usage for medical reasons under state law also appears to remain unchanged following Prop 64’s passage, the controlling California case on this issue, Ross v. RagingWire Telecommunications, Inc., may be vulnerable now that California has legalized recreational marijuana.

In the Ross case, the California Supreme Court held that employers are not required to accommodate an employee’s use of marijuana, even if the marijuana was recommended by a health care professional.  The Court noted that, although the Compassionate Use Act of 1996 prohibits people who use marijuana under the care of a physician from being charged criminally, the Act does not grant marijuana the same status as a legal prescription drug.  (Health & Safety Code section 11362.5.)  Similarly, the Court reasoned that, since the California Fair Employment and Housing Act (“FEHA”) does not require employers to accommodate illegal drug use, the employer could lawfully terminate the employee for using medical marijuana.  (Government Code section 12940 et seq.)  The Court further stated that marijuana cannot be “completely legalize[d] for medical purposes” because it is illegal under federal law.

Though Ross is still good law even though Prop 64 passed, based on the Court’s reasoning, it is possible that a court examining identical facts could come to a different conclusion based on California’s legalization of marijuana.  On the other hand, because marijuana is still designated a Schedule I drug under the federal Controlled Substances Act, a court could point to the federal law and maintain that the applicability of the California Compassionate Use Act and the FEHA are limited

Employers will ultimately have to do a cost benefit analysis if the issue of accommodating an employee’s use of marijuana arises.  Absent further guidance from the State or the courts, employers should not have to make such accommodations.

What About Conduct Outside of the Workplace?

The legalization of recreational marijuana under California law may pose potential enforcement challenges when implementing workplace drug policies and conducting drug tests on employees.  For example, an employee may test positive for marijuana (i.e., the presence of “THC” in their system) based on off-duty consumption.  That employee may argue that despite the test, he or she has compiled with the letter of the employer’s policy because the policy only bans use, possession or being under the influence of marijuana while on the employer’s property or while on duty.  In fact, many factors impact whether someone tests positive for marijuana, including the person’s individual metabolism, frequency of use, amount of use, and type of test (urine, blood, hair) used.  Many tests are unable to determine when a person consumed marijuana.

Employees generally have a constitutional right to privacy with respect to their off-duty conduct unless such conduct has a nexus to their employment.  Whether a court will find a nexus to employment may depend on the particular position at issue.  For example, peace officers are held to a higher off-duty standard of behavior than other types of classifications.  Employees who come into regular contact with children are often also held to a higher standard.

Employers should review their drug free workplace policies to ensure that they clearly state that an employee may be disciplined for off-duty use under certain circumstances.  Such a policy should indicate that off-duty drug use may be subject to discipline if such conduct can be reasonably said to affect an employee’s job duties.  When disciplining an employee for such off-duty conduct, however, we recommend that employers discuss such discipline with legal counsel.

Where Do We Go From Here?

LCW will be tracking further guidance arising from Prop 64 and its implementing regulations over the coming year and will provide updates as needed.

If you have any questions about this issue, please contact our Los Angeles, San Francisco, Fresno, Sacramento, or San Diego office.

CalPERS Board Adopts New Regulations Regarding Pensionable Compensation for New Members

Posted in Pension, Retirement

The CalPERS Board of Administration recently adopted the final regulations concerning the administration of pensionable compensation for “New Members” as defined under the Public Employees’ Pension Reform Act of 2013 (PEPRA).

Initially, employers should be familiar with the nomenclature that is used in reference to compensation that is reported to CalPERS. Compensation that may be reported to CalPERS is referred to as “compensation earnable” for Classic Members (i.e., members who are not New Members under PEPRA) and “pensionable compensation” for New Members. What is important to note is that there is no item of pensionable compensation for New Members that is not also compensation earnable for Classic Members.  Rather, it is the converse.  There are items of compensation earnable for Classic Members that are not considered Pensionable Compensation for New Members.   We highlight those notable differences as they appear in the new CalPERS regulations.

First, uniform pay for Classic Members is compensation earnable. The amount reported must be the amount paid as a uniform allowance to employees or the cost paid by the employer for the uniform and any maintenance which should be stated in the applicable memorandum of understanding.  CalPERS requires that uniform pay be reported each pay period as a fraction of the total annual cost per member, even where uniform allowance may only be paid to a member one-time a year.  Uniform pay for New Members, however, is not pensionable compensation in any amount.

Second, and of no surprise, is that Employer-Paid Member Contributions (EPMC) is not pensionable compensation for New Members which makes sense given employers are prohibited from picking-up any amount of a New Member’s normal member contribution rate. EPMC is compensation earnable for Classic Members if the employer, by contract amendment with CalPERS, agrees EPMC will be special compensation.

Third, bonuses are not pensionable for New Members. Bonuses remain compensation earnable for Classic Members if it is for superior performance such as “annual performance bonus” and “merit pay” provided it is not paid in the final compensation period.  A program must be in place to identify the performance goals and objectives.  Similarly, “management incentive pay,” is compensation earnable for Classic Members, if it is in the form of additional time off or extra pay due to the unique nature of their job, but not for overtime duties. Classic members cannot have the option to take time off or receive extra pay for this item of special compensation.  Management incentive pay is not pensionable compensation for New Members.

Fourth,  “temporary upgrade pay” is not pensionable compensation for New Members while it remains compensation earnable for Classic Members if it is paid to employees who are required by their employer or governing board or body to work in an upgraded position/classification of limited duration. Interestingly, recent legislation attempts to prevent employers from temporarily placing employees in upgraded positions for more than 960 hours in a fiscal year, otherwise the employer faces triple monetary penalties to CalPERS.  It comes as no surprise that this legislation was sponsored by labor unions and only for the purpose of preventing employers from leaving employees in out-of-class assignments rather than promoting the employee to the classification, even where there is no impact to the pension system.  Employers can refer to our recent blog regarding new Government Code section 20480.

Finally, CalPERS indicates that overtime hours that are built into the normal work schedule of the employee will only be pensionable for New Members who are in the local fire or local police membership classifications if it is pursuant to an FLSA 7(k) work schedule. The FLSA 7(k) work schedule provides a higher threshold for overtime for fire or police personnel depending on the work period established by the employer.  For Classic Members, the premium paid for FLSA overtime that is built into the normal regular schedule of the employee is considered compensation earnable, and is not limited to local fire or local police membership classifications.  Not the case for non-safety New Members.

This may cause some consternation for non-safety employees who work 24/7 operations under which FLSA overtime is built into the normal working schedule for that class of employees, for example, dispatchers or nurses. The result is that in cases of employees in the same non-safety classification with FLSA built-in overtime as part of the normal full-time working hours, there will be an inequity between Classic Members and New Members.

CalPERS’ interpretation, however, is not far-fetched as the PEPRA provides that pensionable compensation does not include “compensation for overtime work, other than as defined in Section 207(k) of Title 29 of the United States Code” (i.e., the FLSA 7(k) schedule). Nonetheless, the PEPRA also states that pensionable compensation is defined, in part, as “the normal monthly rate of pay or base pay of the member paid in cash to similarly situated members of the same group or class of employment for services rendered on a full-time basis during normal working hours, pursuant to publicly available pay schedules.”  Thus, for non-safety employees who receive built-in FLSA overtime premium pay as part of their normal full-time working, which is correspondingly reflected on a publicly available pay schedule, it would seem the overtime premium pay is pensionable compensation but for the exclusion listed above.

Employers should review their MOUs and personnel policies to ensure that provisions therein do not contradict the PERPA and CalPERS’ new regulations.

Sexual Harassment Training Under Scrutiny: It’s Not Just What You Say, But What You Do That Matters

Posted in Harassment, Legislation, Personnel Issues, Public Sector, Workplace Policies

In the wake of recent attention to sexual harassment in the workplace, employers and members of the public are asking: what about all of those sexual harassment trainings we required?  Are they helping?  How do we know?  And, if they’re not achieving our goals (public policy and agency-specific), what can we do better?

Just What Training is Legally Mandated?

As California public sector employers are well-aware, Assembly Bill 1825, adopted in 2004, began requiring California employers with 50 or more employees, as well as all state employers, employers that are political or civil subdivisions of the state, and city employers, to provide sexual harassment prevention training and education to all supervisory employees.  In accordance with AB 1825’s basic requirements, employers are required to provide two hours of training to supervisory employees every two years (and within six months of becoming employed as a supervisor).  The training must be “classroom” or other “effective interactive training and education,” and it must address information and practical guidance regarding federal and state law concerning the prohibition against and the prevention and correction of sexual harassment; the remedies available to victims of sexual harassment in employment; and practical examples to instruct supervisors in the prevention of harassment, discrimination, and retaliation.

In recent years, harassment prevention training requirements in the state of California have been expanded.  In 2014, the AB 1825 training requirement was updated by AB 2053 to require education on the prevention of “abusive conduct” in the workplace – conduct that a reasonable person would find hostile or offensive, but not related to a person’s protected status (i.e. not necessarily related to a person’s sex or gender).  Effective January 1, 2017, following the sexual harassment scandal involving the Mayor of San Diego, and other high-profile cases involving elected officials, the legislature adopted a new law (AB 1661), requiring sexual harassment prevention training and education for members of local legislative bodies and elected officials for local agencies – the training and education is required if any compensation, salary, or stipend is provided to any member of the legislative body or the elected official.  Most recently, in October this year, Senate Bill 396 was passed, requiring the AB 1825 training to include a training component inclusive of harassment based on gender identity, gender expression, and sexual orientation.  Notably, from its outset, AB 1825 set forth a “minimum threshold” for training requirements.  Employers could, and still may, set a longer, more frequent, or more elaborate training and education program regarding workplace harassment or other forms of unlawful discrimination.

But Does it Work?

In June 2016, the U.S. Equal Employment Opportunity Commission (“EEOC”) published a report, the Study of Harassment in the Workplace, which addressed whether training is effective in preventing harassment.  To assess whether training is effective, the EEOC analyzed numerous studies conducted by research institutions, social scientists, and employers.   In a study of federal government employees, the EEOC learned that “participation in training was associated with an increased probability, particularly for men, of considering unwanted sexual gestures, remarks, touching, and pressure for dates to be a form of sexual harassment.”  However, the EEOC also learned that while training’s have a positive impact on knowledge acquisition, they are less likely, on their own, to have a significant impact on changing attitudes, and can have the opposite effect.  A common theme that developed in the EEOC’s research was that “effective training does not occur within a vacuum.”

As a result of its Study, the EEOC came to two conclusions: (1) empirical data to date does not permit the EEOC to make a declarative statement about whether training, standing alone, is or is not an effective tool in preventing harassment, but (2) empirical deficiencies aside, practical and anecdotal evidence from employers and trainers led the EEOC to conclude that training is an essential component of an anti-harassment effort.  However, the EEOC notes, “to be effective in stopping harassment, such training cannot stand alone but rather must be part of a holistic effort undertaken by the employer to prevent harassment that includes elements of leadership and accountability.”  (Emphasis added.)

Where Do We Go From Here?

Recent widely read news reports, targets of harassment speaking out, and perpetrators admitting to misconduct have demonstrated that sexual harassment cannot go unattended.  There is something we can do about it!

Overwhelmingly, the EEOC recommends that workplace trainings address not only what the law requires, but also organizational culture.  It suggests trainings that speak to workplace civility generally, and potentially, bystander intervention.  Workplace civility training is aimed not only at eliminating unwelcome behavior based on characteristics protected under employment non-discrimination laws, but on promoting respect and civility in the workplace broadly.  Civility training is focused on what employees and managers should do, rather than should not do, in the workplace.  Bystander training is designed to create awareness, a sense of “collective responsibility,” and a sense of empowerment, and to provide intervention resources for those who are not comfortable (or safe) taking action in the moment.  It has largely been used in addressing violence and in the education context by Department of Education guidance prompting students to intervene in preventing sexual assault.  The EEOC opines that such training could also be effective in the workplace.

In addition to insuring effective training content and training modules, the EEOC notes that successful training requires:

  • Support at the highest levels, demonstrating that leadership is serious about preventing harassment in the workplace;
  • Repetition and reinforcement on a regular basis to demonstrate an employer’s commitment to training efforts; not just once a year, or once every other year, but at regularly scheduled events in which key information is reinforced;
  • Qualified, live, and interactive trainers who are dynamic, engaging, and have full command of the subject matter; and
  • Routine training evaluation to determine whether training changed employee behaviors or behaviors employees observe in the workplace.

Notably, the EEOC’s research was not limited to California, and many EEOC recommendations for a holistic training approach are incorporated into California’s legal training mandates, and Department of Fair Employment and Housing (“DFEH”) regulations and publications.  For example, the DFEH Workplace Harassment Guide for Employers provides that an effective anti-harassment program (i.e. something more than just training) includes:

  • Clear and easy to understand written policy, distributed to employees and discussed at meetings on a regular basis – e.g. every six months;
  • Buy-in from the top! This means that management should be the role model for appropriate workplace behavior, understand policies, and walk the walk and talk the talk;
  • Supervisor and management training required by law (AB 1825 training);
  • Specialized training for complaint handlers;
  • Policies and procedures for responding to and investigating complaints;
  • Prompt, thorough, and fair investigations of complaints; and
  • Prompt and fair remedial action.

With respect to training content, DFEH Regulations set forth three learning objectives: (1) assisting California employers in changing or modifying workplace behaviors that create or contribute to “sexual harassment”; (2) providing trainees with information related to the negative effects of abusive conduct in the workplace; and (3) developing, fostering, and encouraging a set of values in supervisory employees who complete mandated training that will assist them in preventing and effectively responding to incidents of sexual harassment, and implementing mechanisms to promptly address and correct wrongful behavior.

The DFEH also requires that trainers who provide legally mandated training be attorneys admitted for two or more years to the bar; human resources professionals or harassment prevention consultants with a minimum of two or more years of practical experience; or professors or instructors in law schools, colleges, or universities who have a post-graduate degree or California teaching credential with either twenty instruction hours, or two or more years of law school, college, or university teaching experience regarding employment law under the FEHA and/or Title VII of the Civil Rights Act.  It is important for trainers to have a clear understanding of legal requirements, and DFEH training regulations, so that training content also complies with the specified, required elements set forth in California.

While an employer can rely on the law to instruct its actions; at the end of the day, it is not just what your agency “says,” but what it “does” that will set the appropriate tone and emphasis on preventing workplace harassment, and promoting workplace civility.

As many of our readers are already aware, LCW frequently provides trainings with highly experienced trainers in the area of preventing workplace harassment, discrimination, retaliation, and abusive conduct.  We look forward to bringing you updated training materials and presentations in 2018.

Labor Negotiations in 2017 – My Life at the Table

Posted in Labor Relations, Negotiations, Pension, Wage and Hour

This post was authored by Peter J. Brown

As 2017 comes to a close, it is a time of reflection for me since I have spent so much time this year in collective bargaining negotiations and in Board and Council meetings to discuss these negotiations.  It is an interesting time in our nation with a national economy that is humming along.  While California public agencies are benefiting with sources of revenue increasing, they are facing lots of challenges on the expenditure side of the balance sheet.  The reaction has been varied as the impacts of rising revenue and expenditures hit agencies differently.  Agencies have authorized me to offer substantial increases; I have had an agency implement terms and conditions of employment with considerable cuts; and everything in between.  One thing has proven to be consistent – the legislative bodies in the public sector look at the issue of wages and benefits very differently.  This is driven by both the financial condition of the agency as well the makeup of the elected officials and their beliefs about how government money should be spent.   Here are some thoughts if you are involved in this process as you start 2018.

Many elected officials are focused on rising pension costs as a result of CalPERS’ December 2016 announcement that it is reducing its discount rate (the rate CalPERS projects it will earn from its investments).   The impact of CalPERS’ announcement has caused many agencies to see projected rate increases in excess of 20% in the next three to five years.  The result is that when many agencies compare their projected revenue and expenditure increases over the same period of time, they are projecting that they will experience significant shortfalls.  Several of the legislative bodies at these agencies are wondering how it will be possible to maintain services at current levels when they look at their expenditures (with the inclusion of the projected CalPERS rate increases) projected over the next few years.  While most of these same agencies are experiencing healthy revenue increases caused by increases to tax revenues (e.g., property, sales and transient occupancy) as people are spending more money, those projected revenue increases are often significantly outpaced by the projected expenditure increases.  This has caused a varied response to labor whose members are seeking cost of living increases and other improvements to their wages and benefits.  In many cases, labor is seeking only to keep up with the increase in the cost of living, but even this request can be difficult for agencies to grant as elected officials view even those types of increases as adding to their projected shortfalls.   Improvements do not have to be pensionable.  There are lots of non-pensionable improvement options.  2017 has seen this strategy become more commonly used. Evaluating opportunities for non-economic improvements to working conditions is a strategy that can close the gap if financial resources aren’t available to meet employee expectations.

Alternatively, there are many agencies who are less focused on the future and the concerns about what might happen and more focused on the present and that their employees feel that their work should be rewarded with the increases that people (regardless of where they work) feel they should receive for their hard work and dedication to their jobs.  I have heard the comment “we are doing more with less” hundreds of times at the collective bargaining table.  While some of it is just rhetoric, there is some truth to it in the departments of some agencies.  Staffing is not as high as it used be for some agencies.  In addition, since there are many agencies giving increases, it creates somewhat of a domino effect because public employee compensation is often influenced by what the market pays similar employees.  Market comparisons are one of the most significant factors under the fact finding law (Government Code section 3505.4(d)(5)) for a fact finding panel to consider when making recommendations to the agency and employee association following fact finding.   The result of this has caused some agencies to provide increases which they do not actually believe they can afford based on projections, but believe they should provide so that they can maintain public services with quality employees.   Talk to your boards and councils about these issues so they can decide how to prioritize how they spend the money that they have been entrusted to spend.

One thing has remained constant in 2017, when the negotiations occur at the collective bargaining table, negotiations have been smoother and more successful.  Elected council and board members are often approached by the employee unions, especially when the unions are not seeing the kind of movement at the table they want or expect.  At those agencies where the elected officials listen but don’t promise anything and understand that negotiating should be done by their negotiators, the negotiations have gone more smoothly.  Often members of a city council or board disagree on the position the agency should take at the table.  While it would likely help facilitate an agreement if they spoke with one voice at the collective bargaining table, the differing interests shared by individual communications between elected officials and union representatives often creates expectations which cannot be realized since the majority of council or board has not authorized or endorsed those same sentiments.  This has happened to me and is part of the process, but as the labor negotiator for the agency, I am limited to the authority provided by the majority of the governing body.  Speaking with one voice shows resolve, a commitment to the process, and trust in the negotiations team.  But, at those agencies where the elected officials do more than listen, the labor unions understandably see that as an opportunity to make progress towards accomplishing their goals through direct contact as opposed to through collective bargaining.   Talking to your elected officials about this issue early and often in the process can help your negotiations to be more successful.

2018 is right around the corner.  If you are going to the table start planning now.  There is a lot to do.  Surveys are important to show your elected officials how the employees’ total compensation compares to the relevant marketplace.  Showing your council or board what pension costs are projected to do to your budget will help them make an informed decision about how to approach labor negotiations.  Having well written MOUs is critical to avoiding grievances or other claims.  There are many new legal issues which you need to consider including the impact of Flores v. City of San Gabriel, AB 119 and DiCarlo v. County of Monterey.  Communicating with your elected officials early about what to expect and managing their expectations will go a long way towards overall success at the table.  If, along the way you run into hurdles, our experienced negotiators are a phone call away and can help you with any part of the process.  Good luck!

The Ninth Circuit Provides Guidance Regarding Compliance with the Minimum Wage Provision of the FLSA

Posted in Wage and Hour, Workplace Policies

In Douglas v. Xerox Business Services, the Ninth Circuit became the latest circuit to rule that employers should look at the workweek as a whole to determine compliance with the minimum-wage provision of the Fair Labor Standards Act (“FLSA”).  This result has also been adopted by Second, Fourth, Eighth, and D.C. Circuits, and is reflective of a policy enacted by the Department decades ago.

The plaintiffs in this case were customer service representatives at call centers operated by Xerox Business Services, LLC.  Their primary duty was to answer incoming calls, but they were also responsible for other tasks, such as attending trainings and meetings and monitoring email.  The plaintiffs were paid pursuant to what the court described as a “mind-numbingly complex payment plan” where employees earned different rates of pay depending on the task performed and the time spent on that task.  They received a flat rate of $9.04 per hour for certain activities (such as trainings and meetings), and their pay rate for time spent performing their primary job duty of managing inbound calls was variable, between $0.15 to $0.25 per minute.  Each employee’s specific pay rate was determined based on quality measures (such as customer satisfaction) and efficiency measures (such as the length of calls).  All other tasks had no specific designated rate.

At the end of each workweek, Xerox totaled the amounts earned by the employee under the payment plan described above and divided by the total hours the employee worked that week to determine the employee’s hourly rate of pay.  If the resulting hourly wage equaled or exceeded the minimum wage, Xerox did not pay the employee anything more.  However, if the resulting hourly wage fell below the minimum wage, Xerox paid the employee a subsidy to increase the employee’s average hourly wage to minimum wage.  This practice ensured that no employee’s average weekly pay ever fell below the minimum wage.

The plaintiffs argued that the FLSA measures compliance on an hour-by-hour basis and does not allow averaging over a longer period of time.  Therefore, according to the plaintiffs, Xerox violated the FLSA by paying its employees above the minimum wage for some hours worked and below the minimum wage for other hours worked.  The plaintiffs argued that they were entitled to back pay for every hour they worked at a rate below the minimum wage.

The Ninth Circuit rejected the plaintiffs’ claims and concluded that compliance with the FLSA’s minimum wage provision is properly determined by evaluating whether an employee was paid at a rate equal to or above the minimum wage over the course of the workweek.  Therefore, the court determined that Xerox did not violate the FLSA by averaging employees’ various rates of pay over the workweek to ensure the average rate was equal to or greater than the minimum wage.

In reaching this decision, the court acknowledged that the text of the FLSA was not instructive and instead looked for guidance to the Department of Labor’s long-standing rule on the subject, which has been in effect since 1938, and the rules followed in other circuits.  No circuit that has examined this issue has taken a contrary position.

Wage and hour issues involve a particularly complex area of the law.  Many employers find it helpful to consult with counsel regarding their pay practices to ensure compliance.

The New Year is Nigh, and so is PEPRA’s Authority to Impose Increases to Member Contributions

Posted in Retirement, Wage and Hour

January 1, 2018, is just around the corner, and as of that date PERS contracting agencies, as well as employers in ‘37 Act county retirement systems, will for the first time have the legal ability to impose increases to the member contribution rate of their classic employees.

The Public Employee Pension Reform Act of 2013 (PEPRA) was intended to put the brakes on the increasing costs of pension systems.  This has not—at least as of now—eventuated; costs continue to rise, and the prognosis for the future is not good. Many local agencies are now paying almost fifty cents or more into the retirement system for every dollar of payroll, and the likelihood is that these numbers will continue to rise.

What can local agencies do? Are they obligated forever to sign blank checks to retirement systems?

Well, PERS contracting agencies will be able to utilize Government Code section 20516.5. The Government Code already provides that employers and employees both contribute to PERS. Employee member contribution rates are fixed by statute: for local safety members (police and fire) the rate is 9% of pay; for local miscellaneous employees, the rate is 7% of pay, or 8% if the employees are provided a more generous pension formula (e.g. 2.7% at age 55.)

PEPRA added section 20516.5 to the Government Code; it will allow an increase to member contribution rates as of January 1, 2018, without requiring agreement with the employee organizations.  This effectively shifts some of the normal cost from the employer to the member.  It can be imposed on classic members  in the absence of agreement but only after impasse and any mediation and fact finding.  However, the benefit of this new opportunity may be limited. An increase to the member contribution rate for classic miscellaneous employees cannot exceed 8% of pay. Since classic member contributions are already capped at 7% or 8%, this new provision gives agencies little or no room to increase employee support of the cost of their benefits.  (PEPRA new members are already required to pay by payroll deduction  50% of normal cost of their future benefit and are limited to a retirement formula of 2.7% at age 57 for safety and 2% at age 62 for miscellaneous members. As a result, section 20516.5 is not applicable to new members.)

The situation for police and fire safety employees allows greater sharing of normal costs. The maximum permitted for classic police and fire employees  under section 20516.5 is 12%. Since the statutory classic safety member contribution is already 9%, PEPRA will allow, starting January 1, an agency to impose, even without agreement, a significantly higher contribution to PERS by police and fire.  Any increase to member contribution rates under section 20516.5 will be credited to the member’s account.

The counterpart PEPRA provision added to the County Employees Retirement Law of 1937 is similar in intent but different in specifics. That provision, Government Code section 31631.5, also will allow an employer in a ’37 Act system to require employees to pay fifty percent of normal cost of benefits, but again, only after completion of the negotiations process and any impasse procedures including mediation and fact finding. And, similar to the PERS provision, imposing an increase to member contributions is capped. The maxima are set forth as percentages above the normal rates of contribution for different groups of employees. Thus, the maximum contribution cannot be more than 14% above the normal cost for general members, 33% for police and fire, and 37% for safety employees other than police and fire.

While the ability of an employer to impose an equal sharing of the normal cost of the benefit is capped, employers and employee organizations may still agree to cost share the employer’s contribution rate.  Under PERS, Government Code section 20516 has always permitted employers and employee organizations to agree that members will pay a portion of the employer’s contribution rate, but this additional cost sharing cannot be imposed.  For 1937 Act agencies, PEPRA added Government Code section 31631 which permits the employer and members to agree that members will pay any portion of the employer’s contributions, but again, this cannot be imposed.

Further changes in the retirement landscape could be on the horizon for 2018. The California State Association of Counties recently reported that the PERS Board of Administration is currently reviewing its investment strategy and could adopt a further reduction in its discount rate. PERS reduced the discount rate from 7.5 to 7% in December 2016, after determining that its expected rate of return on investments needed to be reduced. One option under consideration is a further reduction, potentially to as low as 6.5%. Any reduction of the discount rate by PERS is likely to result in further increases in the contribution percentage required of local agencies contracting with PERS. We will keep you advised of further developments as they occur. Stay tuned.