Do you plan to enter labor negotiations in the spring? If so, fall is the perfect time to audit your labor agreements.

A labor agreement audit is a legal compliance review and internal analysis of contract language. Regular audits of an agency’s labor agreements are important for many reasons:

1. Legal Compliance: Labor, leaves, wage and hour, and pension laws change over time. Regular review of your agreements ensures that your agency can address non-compliance issues, which can help an agency avoid litigation and potential fines.
2. Clarifying Language: Labor agreements often contain ambiguous and even contradictory provisions. An audit can help identify provisions that may be subject to multiple interpretations so that the parties can negotiate clarifying language and ensure that both parties clearly understand the terms of the agreement. An audit can also help identify areas that are not addressed by the contract, such as what happens when a paid holiday falls on an employee’s regular day off, how much time in advance must employees request vacation, or whether there is a waiting period before temporary upgrade pay applies. Identifying these gaps allows the parties to negotiate clarifying provisions in forthcoming negotiations.
3. Benefits Compliance: Benefit law, including the Affordable Care Act and the Public Employees’ Retirement Law, can be complicated and sometimes dense. Non-compliance can lead to fines. For example, for agencies in CalPERS, 2022 legislation shifted financial liability from retirees to their employers for misreporting employee compensation if certain conditions are met. One such condition includes whether a non-pensionable compensation item was included in a Memorandum of Understanding or Collective Bargaining Agreement. CalPERS actively audits agencies, and agencies can preempt a CalPERS audit by proactively addressing non-compliance issues.
4. Wage and Hour Issues: Agencies should review their agreements and labor practices for wage and hour compliance. This includes working hours, rest and meal breaks, overtime compensation, and properly defining the work period.
5. Labor Relations: Agencies should review language regarding various labor relations matters, such as dues deduction, no strike provisions, union access rights, and union release time to ensure they are addressed in detail in the agreement, and to ensure they are in compliance with statutory requirements as well as changes created by case law. Agencies should review grievance procedure provisions to ensure that time limits, appeal procedures, and grievability are clearly spelled out. Finally, union waivers of the right to meet and confer over a change within scope of bargaining must be clear and unmistakable in order to be enforceable. Agencies should review whether waivers meet legal requirements to avoid future challenges.

Au audit is most effective when an internal examiner, such as an analyst in Human Resources or Finance, partners with an outside legal auditor to review for legal and payroll compliance. Payroll and pension reporting errors in particular may not be apparent from the language of the agreement. Such a partnership can enable internal investigation to ensure that compliance issues are properly addressed within the agreement, within agency practices, and within the payroll system.

For more detailed discussion on conducting MOU and payroll audits for CalPERS and wage and hour compliance, register here to attend LCW’s upcoming webinar on “Addressing FLSA and CalPERS Compliance in a Single MOU/Payroll Audit” presented by Lisa Charbonneau and Michael Youril on October 10^th 2024 at 10 am.