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Public agency employers in California are facing increasing pressure to offer competitive, flexible, and legally compliant employee benefits. But there is one foundational document many agencies still overlook or perhaps do not fully understand—the Section 125 cafeteria plan. Without it, certain popular and tax-advantaged benefits cannot be offered, and agencies may inadvertently run afoul of federal tax law.

In this post, we break down what a cafeteria plan is, why it is legally necessary, and what risks public agencies could face without one.

What Is a Cafeteria Plan?

A cafeteria plan is a written plan that allows employees to choose between: (1) receiving their full wages in cash on their paycheck; and (2) setting aside some of their wages (known as a “salary reduction”) to pay for qualified benefits on a pre-tax basis. The plan takes its name from Section 125 of the Internal Revenue Code (“IRC”). For public agencies, this written plan is essential to offering a range of employee benefits in a compliant and tax-efficient manner.

Paying for Benefits With Pre-Tax Salary Reductions Must Be Done Through a Cafeteria Plan

The key feature of a cafeteria plan is that it allows employees to reduce their salaries on a pre-tax basis to pay for their share of health insurance premiums and other qualified benefits. Without a cafeteria plan, employees’ premium contributions must be taken on an after-tax basis, which can:

  • Increase employees’ taxable income,
  • Decrease their take-home pay,
  • Reduce the perceived value of your public agency’s benefits package, and
  • Take away the public agency’s opportunity to save on payroll taxes tied to the pre-tax portions of employee salaries.

Some Benefits Can Only Be Offered Through a Cafeteria Plan

Some of the most valuable and popular benefits—like Health Flexible Spending Accounts (Health FSAs) and Dependent Care Assistance Programs (DCAPs) – can only be offered through a cafeteria plan. Without a formal cafeteria plan:

  • Employees cannot contribute pre-tax dollars to a Health FSA to cover eligible medical expenses.
  • Employees cannot contribute to a DCAP to pay for child care or elder care expenses with pre-tax income.

This means that without a cafeteria plan in place, a Health FSA or a DCAP would be taxable benefits. As a result, your public agency may be denying employees access to critical tax savings—or offering benefits in violation of IRS rules if a Health FSA or DCAP are treated as a pre-tax benefit—when there is no cafeteria plan.

Offering Cash in Lieu of Health Insurance? Your Public Agency Needs a Cafeteria Plan

Many public agencies offer a “cash in lieu” or “opt-out” payment to employees who waive agency-provided health insurance because they have other group health insurance (such as coverage through a spouse). Cash in lieu should be offered through a cafeteria plan to avoid triggering the constructive receipt doctrine. When the constructive receipt doctrine applies:

  • The IRS could determine that employees had the choice to receive either cash in lieu or benefits and, therefore, should be taxed on the value of the cash in lieu regardless of their election.
  • The cash in lieu payments will be considered taxable income—even if the employee does not elect to take the cash.

This can result in surprise tax liabilities for employees and compliance issues for the public agency.

Compliance with the CalPERS Equal Contribution Rule

Public agencies that provide health insurance through the Public Employees’ Medical and Hospital Care Act (“PEMHCA”) must comply with the equal contribution rule. The equal contribution rule generally requires employers to provide the same contribution amount toward health benefits for all employees and retirees in a group or class. Gov. Code, § 22892(b).

A cafeteria plan provides a structure where a public agency can provide a cafeteria plan contribution to active employees to pay for health insurance, without offering the same contribution to retirees, while maintaining equal treatment under the CalPERS rules. Failure to use a cafeteria plan could inadvertently result in inequities in employer contributions, potentially putting your public agency at odds with the CalPERS regulations.

Other Cafeteria Plan Benefits

Beyond legal compliance, adopting a cafeteria plan provides:

  • Flexibility: Employees can elect and customize their cafeteria plan benefits based on the needs of themselves and their family members.
  • Cost Savings: Both employers and employees save on payroll and income taxes.
  • Competitiveness: Public agencies offering pre-tax benefits are more attractive in today’s competitive public sector job market.

Has Your Public Agency Properly Adopted a Cafeteria Plan?

In order to take advantage of all of the benefits offered by having a cafeteria plan, it is essential that a public agency ensure that it has completed all the steps to adopt a valid one. There are two key requirements. First, Section 125 requires the cafeteria plan to exist in the form of a written plan, which is usually called a plan document. A cafeteria plan document specifies the operational terms of the cafeteria plan, including what benefits are offered, the term and structure of each benefit, eligibility requirements, and a description of employer contributions and employee salary reduction agreements.

Second, the cafeteria plan must be adopted by an employer and should be effective on or before the first day of the cafeteria plan year to which it relates. (Prop. Treas. Reg. § 1.125-1(c)(1).) The Proposed Treasury regulations provide guidance and the IRS’s stance on the administration of cafeteria plans. While the Proposed Treasury regulations do not specify how an employer must adopt a cafeteria plan, the generally acceptable method is for the governing body of a public agency to adopt it. If a cafeteria plan is not formally adopted by the employer, there is a risk that the employer does not have a valid cafeteria plan in place and as a result, employees who are electing to pay for their share of their benefits by a salary reduction must do so on an after-tax basis.

Trusted legal counsel can assist public agencies with:

  • Assessing whether a public agency has adopted a valid cafeteria plan.
  • Drafting Section 125 cafeteria plan documents and customizing them to the public agency’s benefits.
  • Reviewing existing plans for compliance with IRS and CalPERS regulations.
  • Advising on plan implementation and employee communications.

Key Takeaway: Implementing a compliant Section 125 cafeteria plan is not optional—it is a necessary legal safeguard and a smart benefits move. If your public agency does not have a cafeteria plan—or if your current plan has not been reviewed in the last few years—now is the time to act.

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

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U.S. Supreme Court Justice David Souter passed away on May 8, 2025, at the age of 85. A quiet and scholarly figure, Justice Souter served nearly two decades on the high court, leaving behind a legacy marked by judicial restraint, independence, and humility.

Nominated by President George H. W. Bush and confirmed in 1990, Souter was initially seen as a conservative jurist expected to align with the Court’s right wing. Yet over time, he became a key member of its moderate-to-liberal bloc. His evolution was not driven by ideology, but by method. Souter believed that precedent carried deep meaning, and that the law must be understood in the context of real lives. His judicial philosophy reminds us that jurisprudence can evolve not from politics, but from principle.

That commitment to principle found perhaps its clearest articulation in Planned Parenthood v. Casey (1992), where Souter joined Justices O’Connor and Kennedy in crafting the controlling opinion. Souter, who had written his senior thesis at Harvard on the legal positivism of Oliver Wendell Holmes Jr., seemed in Casey to carry forward Holmes’s legacy of pragmatic judicial thought.

Souter is widely credited with authoring the portion of the opinion discussing stare decisis, in which the plurality articulated a four-part test for when the Court should consider overruling precedent: whether the existing rule had become unworkable; whether reliance on the rule would create hardship or inequity; whether legal developments had left the rule a relic of outdated doctrine; and whether changes in factual understanding had undermined its continued justification. The opinion grounded the Court’s legitimacy not in political winds, but in the public’s trust that legal reasoning can remain principled even in contentious times. The Constitution, it insisted, “serves human values,” and that service demands both continuity and humility.

Legal historian David Garrow observed that this part of the opinion on stare decisis contained “two paragraphs that rank among the most memorable lines ever authored by an American jurist.” Souter wrote:

Where, in the performance of its judicial duties, the Court decides a case in such a way as to resolve the sort of intensely divisive controversy reflected in Roe and those rare, comparable cases, its decision has a dimension that the resolution of the normal case does not carry. It is the dimension present whenever the Court’s interpretation of the Constitution calls the contending sides of a national controversy to end their national division by accepting a common mandate rooted in the Constitution.

The Court is not asked to do this very often, having thus addressed the Nation only twice in our lifetime, in the decisions of Brown [v. Board of Education] and Roe. But when the Court does act in this way, its decision requires an equally rare precedential force to counter the inevitable efforts to overturn it and to thwart its implementation. . . . So to overrule under fire in the absence of the most compelling reason to re-examine a watershed decision would subvert the Court’s legitimacy beyond any serious question.

That vision—that the Court’s authority rests not merely on legal acumen but on the public’s belief in its constancy—offered a sober defense of judicial independence and an unease with politically-motivated reversals. Yet Souter did not view precedent as sacrosanct. He understood that circumstances evolve and facts shift, and that adherence to precedent should yield when grounded in reasoned justification. His approach was not rigid, but responsive—anchored in continuity, open to change, and always insistent that any deviation be principled, not political.

Thirty years later, Casey was overturned in Dobbs v. Jackson Women’s Health Organization, on the ground that the 2022 Supreme Court believed that Roe and Casey had simply gotten the constitutional question on abortion wrong. One wonders what Souter might have thought—whether, in his careful framework, the facts, law, and reliance interests had changed so significantly as to merit such a reversal. His views on stare decisis did not bar change entirely but demanded an honest accounting of when change was warranted.

Indeed, at his 2010 Harvard commencement address, Souter reflected that there are “no resolutions immune to rethinking when the significance of old facts may have changed in the changing world.” His was not a vision of moral relativism, but of intellectual humility: a recognition that society’s evolving experience can transform the legal meaning of even long-established rules.

Justice Souter also authored and joined opinions that meaningfully shaped the landscape for public employers. In Board of County Commissioners v. Umbehr (1996), he joined the majority opinion holding that independent contractors who perform services for public entities enjoy First Amendment protections against retaliatory termination for speech on matters of public concern.

He also authored a dissent in Garcetti v. Ceballos (2006), where the majority held that public employees may be disciplined for speech made pursuant to their official duties. Souter warned that the decision risked silencing employees who speak out against government wrongdoing, especially where their official roles give them unique insight. “Would anyone doubt,” he wrote, “that a school principal evaluating the performance of teachers for promotion or pay adjustment retains a citizen’s interest in addressing the quality of teaching in the schools?” It reflected Souter’s faith in the judgment of those closest to the work, and his belief that public institutions depend on the honesty and expertise of those who serve within them.

Justice Souter retired from the Court in 2009, returning to his home state of New Hampshire, where he continued to serve on lower federal courts by designation and remained largely out of public view. Long before his retirement, Souter had expressed a desire to leave Washington, D.C. and return to the rhythms of a quieter life. President Obama announced Souter’s retirement in May 2009 and nominated Sonia Sotomayor to succeed him. Souter never wrote a memoir or sought the spotlight. Instead, he left his legacy to the pages of the U.S. Reports and to the lawyers and judges who continue to cite his careful reasoning.

His passing marks the end of an era, but his work endures in the constitutional protections he helped uphold, in the integrity of his judicial reasoning, and in the example he set for judicial service.

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Keeping employees safe is a priority for all California public agencies.  Unfortunately, workplace violence is real.  Data from the California Department of Industrial Relations reports that in 2021, 57 working people died from acts of workplace violence in California. The Department of Justice reports that in the United States, an average of 1.3 million nonfatal violent crimes in the workplace occurred annually from 2015 to 2019, and strangers committed about half of nonfatal workplace violence.  The good news is that California law provides employers with the ability to petition for a Workplace Violence Restraining Order to protect their employees in the workplace.  Read on to learn more! 

Who can request a Workplace Violence Restraining Order (“WVRO”)?

Any employer in California.

What are the grounds for getting a Workplace Violence Restraining Order?

California Code of Civil Procedure section 527.8 allows an employer to request a restraining order to protect an employee “who has suffered harassment, unlawful violence, or a credible threat of violence from any individual, that can reasonably be construed to be carried out or to have been carried out at the workplace.”

Who can we protect employees from?

Anyone that is causing or threatening harm to employees.  It can be another employee, a former employee, or a non-employee.  It could be a current or former friend or family member of an employee.  Alternatively, it may be a member of the public with whom the employee does not have a close relationship.

What kinds of behavior warrant protection for employees?

The statute allows employers to obtain a WVRO to protect employees from unlawful violence, harassment, and credible threats of violence.  Unlawful violence would include any physical violence in the workplace.  The statute defines “credible threat of violence” as “a knowing and willful statement or course of conduct that would place a reasonable person in fear for their safety, or the safety of their immediate family, and that serves no legitimate purpose.” 

Similarly, the statute defines “harassment” as “a knowing and willful course of conduct directed at a specific person that seriously alarms, annoys, or harasses the person, and that serves no legitimate purpose.”  In addition, harassing conduct “must be that which would cause a reasonable person to suffer substantial emotional distress, and must actually cause substantial emotional distress.”

The statute also provides the following examples of a “course of conduct”: “following or stalking an employee to or from the place of work; entering the workplace; following an employee during hours of employment; making telephone calls to an employee; or sending correspondence to an employee by any means, including, but not limited to, the use of the public or private mails, interoffice mail, facsimile, or computer email.”  LCW has also obtained WVROs in response to someone sending threatening and offensive text messages, voicemails, and emails.

Does the employer need to identify the employees it is protecting?

Yes, when the employer petitions the Court for the WVRO, it will identify all employees for which is seeks protection.  The employer will need to explain to the Court and present evidence why those employees will need protection. Initially, the employer does so by papers presented to the Court and providing written declarations from employees explaining their concerns for their safety.  Later in the WVRO process, the employees seeking protection may need to testify live to explain to the Court why they are seeking protection.   

Is there a limit on how many employees a WVRO can protect?

No, all employees that have experienced or been threatened with violence may be protected under the WVRO.  In addition, if family members of employees are threatened or harassed, they can also be included and protected in the WVRO.

Can an employee get a WVRO on their own?

No, an individual employee cannot get a WVRO on their own. The employee can get other types of restraining orders on their own against the same person (e.g., Civil Harassment Restraining Order).

How does an employer obtain a WVRO?

The first step in obtaining a WVRO is to get a Temporary Restraining Order.  This court order will prohibit the Respondent (person against whom the employer is seeking protection) from coming within a certain distance of the protected employees and order the Respondent to stay away from the employees’ places of work and other places, such as the employees’ homes or cars, based on the facts and circumstances of the threatening behavior.

In order to get a Temporary Restraining Order, the employer must show by reasonable proof there is unlawful violence or a credible threat of violence, and that irreparable harm could result if the order was not granted.  This is accomplished by submitting declarations from the employees involved describing what happened and why they are fearful. 

Generally, if granted, the Temporary Restraining Order will be in effect for 21 days, and the Court will schedule a hearing for the permanent WVRO.  During this time, the Respondent has to be personally served with the Temporary Restraining Order and be provided notice of the Court hearing. 

The second step is the Court hearing for the permanent WVRO.  The Respondent may appear at the hearing, and the employees may need to testify to explain why they are seeking protection.  The Court may issue a WVRO for up the three years “[i]f the judge finds by clear and convincing evidence that the respondent engaged in unlawful violence or made a credible threat of violence.” This WVRO would restrict the Respondent from approaching the protected persons or coming to the worksite.

Does an employer have to act quickly in seeking a WVRO?

Generally yes. Once there is actual violence, a credible threat of violence, or harassment, an employer should act swiftly to help obtain a WVRO to protect employees at the workplace.  Violence can escalate quickly.  In addition, by acting quickly, the employer shows the court it takes the threats seriously and protection is essential.

Getting a WVRO sounds important and helpful, but also overwhelming. 

Yes, but trusted legal counsel can help, and handle every step of the process including preparing employees to testify in court if necessary. 

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Juneteenth commemorates a pivotal moment in U.S. history—the final enforcement of the Emancipation Proclamation in 1865. Celebrated on June 19, the day marks the end of slavery in the United States and serves as a time to reflect on freedom, justice, equity, and progress. Known in the federal service as Juneteenth National Independence Day, it has been recognized as a federal holiday since 2021, and has prompted many public agencies across the country to reevaluate how they acknowledge and observe this important day.

For California public agencies, the decision to observe Juneteenth brings both legal and operational questions—many of which remain relevant year after year.

Is Juneteenth a Required Holiday for California Public Employers?

While Juneteenth is an official federal holiday, California has not declared it a paid state holiday for state and local government entities employees. As a result, the observance of Juneteenth varies widely across jurisdictions:

  • State government offices typically remain open unless otherwise directed.
  • Local government entities (cities, counties, special districts) may adopt policies to observe Juneteenth as a paid holiday or provide alternate ways to commemorate the day.
  • Educational Entities (school and community college districts and county offices of education)—after changes to the Education Code sections 45203 and 88203, effective January 1, 2023, districts added Juneteenth as a recognized, paid holiday for classified (but not certificated or academic) employees.
  • Agency discretion plays a key role. Public agencies must assess whether to formally observe the holiday and how to align that decision with existing employment policies, collective bargaining agreements, and budgetary constraints.

Four Key Considerations for Agencies

1. Review Legal Obligations and Labor Agreements
Check whether your agency’s bargaining agreements, personnel rules, policies, or handbooks list Juneteenth as a holiday or allow for the addition of federal holidays. Your agency also has to comply with obligations to meet-and-confer with employee associations before changing holiday observance policies.

2. Analyze Operational Needs
Determine the impact a Juneteenth holiday would have on essential services, staffing levels, and scheduling. Consider whether alternative forms of observance, such as floating holidays or employee education programs, may be more appropriate.

3. Communicate Early and Clearly
Transparent communication is essential. Employees should understand whether Juneteenth is a working day, a floating holiday, or a paid closure. Clear guidance minimizes confusion and supports consistent application across departments.

4. Consider Voluntary or Educational Programming
Agencies that do not formally observe Juneteenth as a holiday may still recognize it through internal events, guest speakers, historical exhibits, or voluntary learning opportunities. These efforts can foster inclusion and awareness without impacting operations.

Creating a Long-Term Framework

Because Juneteenth is now a national holiday, public agencies may want to proactively develop a consistent, long-term policy. Questions to address include:

  • Will Juneteenth be treated like other federal holidays?  If not, why not?
  • Should employee leave options be adjusted?
  • How will the agency explain and document its approach for employees and the public?

Approaching Juneteenth with clarity, fairness, and consistency allows public employers to stay aligned with evolving norms and employee expectations while remaining operationally sound and legally compliant.

Juneteenth offers a meaningful opportunity for reflection and recognition, and public agencies are responsible to set the tone for its observation. Whether through formal closure, symbolic acknowledgment, or internal education, planning ensures that your agency is prepared—not only for this year, but for years to come.

For questions about implementing or modifying holiday observance policies, consult with your agency counsel or designated labor relations representative.

This blog post appeared in April 2014.  It has been reviewed and is up to date.

The Family Medical Leave Act (“FMLA”) is a developing and nuanced area of employment law that remains an issue for employees and employers.  The FMLA provides job protection to an eligible employee who takes leave (up to 12 workweeks per year) to care for the employee’s spouse, child or parent with a serious health condition or if such condition makes the employee unable to perform any one or more essential functions of their job. 

In a 2014 decision of the U.S. Court of Appeals titled Escriba v. Foster Poultry Farms, the Ninth Circuit Court in California held that an employee can affirmatively decline to use leave under the FMLA.  However, if the employee affirmatively declines to use FMLA to which he/she would otherwise be entitled, the employer may be shielded from a lawsuit for FMLA interference if it takes an adverse employment action against the employee for violation of its policies.    

In Escriba, an employee declined to use FMLA when she took an extended leave of absence to care for her ill father.  When the employee was terminated for failing to comply with the company’s absence policy, she filed a lawsuit claiming that her termination was an unlawful interference with her FMLA rights.  The Court held that the termination was lawful because the employee had expressly declined to have her time off count as FMLA leave and therefore, was not entitled to job protection.

Maria Escriba worked at a Foster Farms processing plant for 18 years.  On November 19, 2007, she met with her immediate supervisor to request two weeks vacation leave to care for her ailing father in Guatemala.  Her supervisor asked if she needed more time in Guatemala to care for her father, and Escriba responded that she did not.  The supervisor told her that if she later decided to request more than two weeks leave, she would need to visit Human Resources.  Escriba then went to the Foster Farms facility superintendent and told him she was going to Guatemala because her dad was very ill.  She told him she was using two weeks of vacation time and asked him for an additional one or two weeks as a “favor.”  The superintendent told Escriba to send a note or documentation to Human Resources for the extra time.  He did not instruct Escriba regarding her rights and obligations under FMLA and did not take any steps to designate her time off as FMLA.  Escriba never requested any additional time from Human Resources.

Escriba then traveled to Guatemala to care for her father.  While there, she decided that returning to work after two weeks would not be practical but she failed to make contact with her employer to extend her leave.  Sixteen days after she was supposed to return to work, Escriba spoke to her union representative who informed her that she was likely going to be terminated under Foster Farm’s “three day no-show, no-call rule.”  Under this policy, an employee is automatically terminated if absent for three work days without notifying the company or without seeking a leave of absence.  Escriba then sued Foster Farms, claiming that the company interfered with her right to take FMLA leave.

To establish a case of FMLA interference, an employee must establish that 1) he/she was eligible for FMLA protection; 2) the employer was covered by the FMLA; 3) the employee was entitled to leave under the FMLA; 4) the employee provided sufficient notice of intent to take leave; and 5) the employer denied the employee FMLA benefits to which he/she was entitled.  Whether Escriba provided sufficient notice of her intent to take FMLA leave was the dispositive issue. Here, the Court found that Escriba elected not to take FMLA leave after telling her supervisor that she only wanted vacation time and that she did not need additional time off.  She also knew that her supervisor only handled requests for vacation whereas Human Resources had handled her past fifteen requests for FMLA leave.  Moreover, Escriba had intended to take vacation time and not family leave.  Accordingly, Escriba did not express intent to take leave under the FMLA.

Thus, this case demonstrates that an employee cannot have it both ways – the employee cannot decline to use FMLA (even if the leave qualifies for FMLA) and then try to hide behind FMLA protections after the fact.  Accordingly, once an employee declines to use FMLA, the employee assumes the risk of the decision.  Thus, as in this case, if an employee declines FMLA leave, and goes on an unauthorized leave of absence, the employee can be lawfully terminated (consistent with agency policies).  Because the FMLA does not require that an employee expressly ask for “FMLA leave” to fall under its protections, we recommend that the employer should inquire of the employee if it is necessary to determine whether FMLA is being sought by the employee and obtain the necessary details of the leave to be taken.

A 2019 District Court case in Montana titled Sims v. Stillwater Mining Co. reiterates the importance of determining whether the employee has invoked FMLA leave.   In Sims,  Josef Sims requested and was granted FMLA leave from July 20, 2015, to August 1, 2015 from his employer. Upon his return to work, Sims requested additional time off due to his injury and submitted a vacation request form that included a comment stating “for Doctor Apt Regarding FMLA follow up.”  He requested vacation time since he believed he had vacation days remaining, and his supervisor approved the requested leave. However, Sims did not have any vacation days left, and his supervisor terminated him for using a vacation day he did not have. Sims alleged interference with his FMLA rights. The Sims court found that, unlike in Escriba, a jury could reasonably conclude that Sims’ actions did not constitute such a clear declination of his rights. He told his supervisor he was seeking time off due to his shoulder injury and indicated on his leave request form that his time off was “regarding FMLA follow up.” Sims submitted he sought vacation time simply because he thought it was available, and it was an easier process than taking FMLA leave.

Unlike in Escriba, Sim’s supervisor did not inquire further to determine whether he was requesting FMLA leave. All Sims was required to convey was “the qualifying reason for the leave or the need for FMLA leave.” When Sims told his supervisor the reason for his leave, it became his supervisor’s duty to determine whether Sims’ request qualified as FMLA protected leave. The Sims court also found that an employee’s request for paid leave does not “foreclose [] the inference that [he] might be interested in FMLA leave.”

 The court found that summary judgement was not appropriate, as the facts did not undisputedly establish Sims “affirmatively declined FMLA leave” and it was still disputed whether Sims provided sufficient notice of his intention to take FMLA leave and whether the employer fulfilled its duty to determine if FMLA leave was sought.

So, while an employee can affirmatively decline to use FMLA, like in Escriba, it is important that employers properly determine whether FMLA is being sought by the employee.

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This article was originally published in April 2017. The information has been reviewed and is up-to-date as of April 2025. 

A newly-elected official is going to want to fill top posts in their organization with persons committed to the official’s vision for the future.  In the same way, a top official after a period of months or years may want to change key lieutenants because of political differences.  Indeed, this ability to pick and choose among key advisers and high-level posts in a public organization has long been a traditional element of politics.

But sometimes, these notions come into a conflict with well-established job protections of public employees.  One of these is the First Amendment, which in a number of circumstances prohibits public agencies from taking adverse actions against employees based on their speech or political associations.  For most public employees, their speech and even their criticism of their own agency can have protection under the First Amendment if particular conditions are met.  Under principles of constitutional law, a public employee can assert a First Amendment retaliation claim against his or her employer if:

  1. the employee suffers an adverse employment action because of the employee’s speech,
  2. that speech was on a matter of public concern,
  3. the speech was outside the employee’s “official duties,” and
  4. a balancing test of certain respective interests favors the employee.

Of course, public employees often have numerous other protections against adverse employment actions, including due process rights, contractual “for cause” standards, and protections in collective bargaining agreements.

As far as the First Amendment is concerned, however, for some key employees, there is in fact room for what can appear to be arbitrary action or “patronage” dismissals.  The United States Supreme Court has created a “policymaker exception” to First Amendment protection, recognizing that an elected official must be able to appoint some high-level politically loyal individuals who will help him or her implement the goals or programs for which the public voted.  See Branti v. Finkel.  The U.S. Court of Appeals for the Ninth Circuit (covering California) described in a 1997 case titled Fazio v. City of San Francisco that if an employee is “a policymaker, then . . . his government employment could be terminated for purely political reasons without offending the First Amendment.”  The Court described the following factors a Court must consider in identifying a “policymaking” position:

  • “vague or broad responsibilities,”
  • “relative pay,”
  • “technical competence,”
  • “power to control others,”
  • “authority to speak in the name of policymakers,”
  • “public perception,”
  • “influence on programs,”
  • “contact with elected officials,” and
  • “responsiveness to partisan politics and political leaders.”

In a 2012 decision, Hunt v. Orange County, the Ninth Circuit added some refinements to the “policymaker” test.  The Court held that the exception turned essentially on an overarching factor of whether political considerations had sufficient significance in the job duties of the employee in question.  “The essential inquiry” the Court described “is whether the hiring authority can demonstrate that party affiliation is an appropriate requirement for the effective performance of the public office involved.”  (Emphasis added.)  In the Hunt case, the Ninth Circuit found that Orange County Sheriff Michael Carona could not rely on the policymaker exception to demote a particular high-ranking employee, William Hunt, who had run against him for Sheriff.  Hunt was the Chief of Police Services for the City of San Clemente, which contracted with Orange County Sheriff’s Department for police work.  The Court reasoned: “Here, the record fails to establish that Hunt’s party affiliation or political outlook were relevant to the effective discharge of his professional duties.”  Instead, the factual findings were that “Hunt’s political statements—which were the basis of his demotion—did not cause, and could not have been reasonably predicted to cause, a disruption in the efficient operation of the department.”  The Court’s opinion interprets the applicable test in a way that appears to make it more difficult for employers to invoke the exception.

District court cases decided after Hunt provide examples of what types of employees were considered policymakers.  In 2013, in Wittenberg v. Public Utility Dist. No. 1 of Skamania County, the U.S. District Court for the Western District of Washington determined that a general manager of a public utility district, selected by three elected officials, was a policymaker.  In 2015, in Summers v. City of McCall, a District Court in Idaho determined that a City Chief of Police in that case met the definition.  In 2016, in Kaelble v. Tulare County, the District Court for the Eastern District of California found that a Supervising Deputy District Attorney to be a policymaker where each of the relevant criteria was satisfied.

In conclusion, deciding that an employee meets the definition of a policymaker can obviously have important ramifications for the employee – and for the agency, if it makes a politically motivated decision as to someone whose job does not actually meet the definition.  Accordingly, it is best to obtain legal advice if there is any doubt.

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If your agency is a contracting agency with the California Public Employees’ Retirement System (CalPERS), chances are you have heard about the important distinctions between an “employee” and an “independent contractor” under the Public Employees’ Retirement Law (PERL).  Whether an individual is an “employee” or an “independent contractor” determines whether the individual must be enrolled in CalPERS under certain circumstances and whether a CalPERS retiree can return to work with a CalPERS agency without being subject to post-retirement work restrictions.

The difficulty for CalPERS employers is that there is no single, absolute factor that distinguishes an “employee” from an “independent contractor.”  Rather, a myriad of factors are considered.  Accordingly, employers often find it difficult to ensure that the person they are contracting with is in fact a true independent contractor, rather than a common law employee.

Many employers have agreements with individuals that clearly state that the individual is an independent contractor and that no employer-employee relationship exists.  However, the label actually matters very little when it comes to determining whether an individual is an “employee” or an “independent contractor.”  Rather, the actual relationship between the parties is paramount and the label may be one of the least important factors in such a determination.  Similarly, just because an employer issues an individual a Form 1099 instead of a W-2 does not guarantee that the individual will be deemed to be an “independent contractor.”

Instead, when it comes to CalPERS, the “common law test” is used to determine whether an individual is an “employee” or an “independent contractor.”  The critical factor is whether the employer retains the right to control the manner and means of accomplishing the work to be performed.  As CalPERS puts it, “[a]n independent contractor is someone who contracts to provide a service or complete a task according to his or her own methods, and is not subject to contracting entity’s control as to the end product, final result of work, or manner and means by which the work is performed.”

Other factors that CalPERS and courts will use to determine whether an individual is an “employee” or an “independent contractor” include:

  1. Is the individual or the employer supplying the tools, instrumentalities, and workspace?
  2. Is the skill required in the occupation the type normally performed under the supervision of the employer or by a specialist without supervision?
  3. Is the individual involved in a distinct occupation or business?
  4. What level of skill is required in the occupation?
  5. Is the relationship between the employer and the individual finite or ongoing?
  6. Is the employee paid by the time or by the job?
  7. Is the work performed part of the employer’s regular business?
  8. How do the parties view their relationship?

As noted above, no single factor is controlling.  CalPERS or a court will look at the individual’s relationship with the agency in light of the above factors and balance them to see if the relationship weighs in favor of an employer-employee relationship or principal-independent contractor relationship.  Understandably, the fluidity of the test frustrates employers who must try to determine at the outset how CalPERS or a court will weigh the factors in the future.  This task is all the more daunting when the employer has not had significant experience in analyzing the factors.  Therefore, contracting agencies should contact legal counsel or develop procedures for analyzing whether an individual is an “employee” or an “independent contractor” in individual circumstances.

There are several mechanisms for CalPERS to be alerted to an individual’s misclassification as an independent contractor instead of an employee.  CalPERS periodically audits contracting agencies to determine, among other things, whether individuals have been improperly classified as “independent contractors” or “employees” for the purposes of the PERL.  CalPERS also can be alerted to certain employment arrangements by the media, taxpayer groups, and other employees.

Even if an employee is properly classified as an independent contractor, there are additional nuances that an employer must address.  CalPERS has been inconsistent in its guidance and publications on how it treats independent contractors.  As we reported, CalPERS indicated in one of its publications that even true independent contractors, those individuals who are independent contractors under the common law control test, are subject to the PERL’s post-retirement restrictions when working directly for a CalPERS employer.  In Circular Letter No. 200-002-14, however, CalPERS backtracked from its previous language and stated that true independent contractors were not subject to the PERL’s requirements on post-retirement work.  As we discussed in our post on Circular Letter No 200-002-14, CalPERS did not clarify whether a CalPERS retiree who is a true independent contractor must still have his or her hours reported in my|CalPERS.  Employers must take care to remain well informed of additional CalPERS guidance and changing interpretations.

It is important for CalPERS contracting entities to take careful stock of the individuals it treats as independent contractors and conduct an analysis of whether they are true independent contractors.  This analysis should be conducted as soon as possible in order for the agency to avoid unwanted consequences for the agency, as well as employees and retirees performing services for the agency.

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