Tuesday, April 27, 2010

AB 1744: Public Employees' Bill of Rights Act

AB 1744 (Portantino)—the “Public Employees' Bill of Rights Act”—recently passed the Assembly Committee on Public Employees, Retirement and Social Security and is now headed to Appropriations. AB 1744 is a “gut and amend” that started out as a bill on enforcing monetary judgments. As currently written, the bill sets forth a “Bill of Rights” that applies only to state civil service employees. Most of the bill just reaffirms existing law. However, there is one significant change. Currently, the statute of limitations for taking disciplinary action against a state employee is 3 years from the date of the misconduct. (Gov. Code 19635.) AB 1744 would amend the limitations period to be 1 year.

I have several major objections to this change. First, the change is purportedly modeled after the Public Safety Officers Procedural Bill of Rights (PSOBOR) (Gov. Code 3300 et. seq.) and the Firefighters Procedural Bill of Rights Act (FPBOR) (Gov. Code 3250 et. seq.) It’s true that both the PSOBOR and FPBOR have a 1-year limitations period for bringing disciplinary actions. However, those statutes differ significantly from the proposed language in AB 1744. For example, the 1-year limitations period under both the PSOBOR and FPBOR is triggered by the date of discovery of the underlying misconduct, not that date the misconduct actually occurred. In contrast, under AB 1744 the limitations period is based on when the misconduct actually occurred.  The difference is significant since misconduct is not always discovered right away, even with due diligence.  Indeed, that's the reason why the current limitations period is 3 years.  If the Legislature wants to shorten the limitations period to 1 year, it should also change the triggering event to be discovery of the misconduct, instead of when the conduct actually occurred.

Second, the current 3-year limitations period under Government Code section 19635 expressly recognizes the problem of late discovery by providing that disciplinary actions, “based on fraud, embezzlement, or the falsification of records shall be valid, if notice of the adverse action is served within three years after the discovery of the fraud, embezzlement, or falsification.” (Emphasis added.) AB 1744 completely erases this sentence from Government Code section 19635. Thus, under AB 1744, an employee can commit fraud against the state, and as long as he or she hides it for more than a year, no discipline can be brought.

Third, AB 1744 does not provide for any “tolling” of the 1-year limitations period. Generally, I do agree that 1 year from discovery should be sufficient time to investigate and bring a disciplinary action. However, there are certain situations where it may not be enough time. This primarily occurs where the misconduct has also triggered a criminal investigation. In that situation, the employer often has to wait to take any administrative action pending completion of the criminal proceedings. Both the PSOBOR and FPBOR provide that the 1-year limitations period is “tolled” in the event of any criminal proceeding. AB 1744 does not provide this same protection.

I can certainly understand an employee’s frustration with being served a notice of discipline for misconduct that occurred 3 years earlier. From a human resources perspective, discipline is most effective if given close in time to the misconduct or performance problem. So as I mentioned above, I generally don’t have a problem with a 1-year limitations period. However, I do have a problem with how AB 1744 is written since it is based on when the conduct actually occurred instead of discovery, and doesn’t provide for tolling where necessary.

AB 1744 is sponsored by various state employee unions, such as the Union of American Physicians and Dentists, Service Employees International Union Local 1000, and American Federation of State, County and Municipal Employees. As of this date, there is no recorded opposition.

Sunday, April 25, 2010

AB 155 Bankruptcy Bill is Back

AB 155 has gotten a lot of press lately. The measure recently passed the Senate Local Government Committee where it had been stalled for over a year. As written, AB 155 would require a local agency to obtain permission from the California Debt and Investment Advisory Commission (CDIAC) before filing for bankruptcy. The obvious effect of AB 155 would be to make it much more difficult for local agencies, like the City of Vallejo, to declare bankruptcy. I first commented on AB 155 in April 2009 (click here for the post), when I called it an overreaction.

However, now that AB 155 has passed its first hurdle, it's worth taking a look at the merits of the bill.  Under AB 155, a public entity must demonstrate to the CDIAC several factors, including: 1) that it cannot pay its debts, 2) that it has exhausted all other options; and 3) that it has a plan for restoring itself to fiscal health. However, those are all factors that are already considered by the bankruptcy court in any bankruptcy filing.  Is there any reason to believe that the CDIAC, which has no experience dealing with Chapter 9 bankruptcies, can evaluate these factors better than a bankruptcy court? I think not.  To the contrary, because the CDIAC is comprised of 7-9 elected officials, politics will invariably come into play in any decision of the CDIAC.

That begs the question, why is AB 155 needed?  In the Senate analysis, the primary justification for AB 155 is the idea that a local bankruptcy has statewide ramifications, and thus, the state should regulate a local agency's ability to seek bankruptcy protection.  As stated in the Senate analysis, "…local and state finances are inextricably linked, the state has a direct interest in the fiscal health of its local governments. A municipal bankruptcy can have statewide repercussions, including higher borrowing costs for other local entities and the state.”  Well, that certainly seems plausible.  However, I wonder if that has been the case.  For example, has the City of Vallejo's bankruptcy filing adversely affected its neighbors?  I'm sure Vallejo's bankruptcy caused all the various bond rating agencies to take a closer look at the finances of California local agencies.  However, apart from that stricter scrutiny I'm not sure that Vallejo's bankruptcy has had the statewide ramifications prophesied by AB 155.

The reality is that AB 155 remains a special interest bill designed to help unions at the bargaining table during these tough economic times.  As I mentioned last year, the possibility of more local agencies actually filing for bankruptcy is fairly remote. However, that hasn’t stopped many local agencies from threatening to “do a Vallejo.”  And that’s really what is driving this bill.  The unions want to prevent cities and counties from using the threat of bankruptcy to leverage concessions.  While the unions' position may be understandable, it doesn't make this a good bill—which it isn't.

Thursday, April 22, 2010

PERB: San Diego City Attorney Improperly Bypassed Union

City of San Diego (Office of the City Attorney) (2010) PERB Dec. No. 2103-M (Issued on 3/26/10)


This case arises from the pension funding crisis in San Diego. Very briefly, the crisis resulted from a series of poor decisions by City officials and trustees of the San Diego City Employees’ Retirement System (SDCERS) in the 1990’s. The poor decisions included twice delaying the City’s contributions to the retirement system, increasing future benefits for City employees, and underpricing employee purchases of retirement service credits. The net effect of these decisions was to grossly underfund the retirement system. As a result of the pension funding crisis, state and federal officials initiated civil and criminal investigations into the actions of public officials and others. State and federal prosecutors ultimately filed criminal charges against some of the SDCERS trustees, including the Local 145 president.

In 2004, Michael Aguirre (Aguirre) was elected the City Attorney on a campaign promising to clean up the financial mess facing the City. As part of that vow, Aguirre took aim at the underpricing of retirement credits by SDCERS. Specifically, under the union contract with Local 145, employees were allowed to purchase up to five years of retirement service credit at cost. However, in calculating the price for service credits, SDCERS staff grossly underestimated the true cost of the credits. Aguirre estimated it was a $147 million mistake. After he took office, Aguirre filed a civil action in an attempt to reverse the effects of the underpricing of the service credits. In addition, Aguirre issued a press release which gave rise to this unfair practice charge. The press release Aguirre issued directed employees to a form on the internet that they could submit to voluntarily rescind the prior purchase of service credits. Local 145 argued, among other allegations, that Aguirre’s actions constituted “direct dealing” with employees.


While PERB dismissed the other allegations, the Board found that Aguirre’s press release constituted an attempt to bargain directly with employees, and was thus an unfair practice. In its decision, PERB held:

“This action goes beyond correcting the price shortfall and disregards the MOU language that expressly authorizes employee purchases of service credit at a price set by the retirement system. By soliciting employees to rescind their purchase of service credits, made in accordance with the MOU, the City has gone directly to the employees to obtain their waiver of a benefit negotiated by Local 145, based on the City’s subsequent determination that the credits were underpriced to the detriment of the City. Consequently, the city attorney’s direct request to employees to rescind service credit purchases, constituted bypass of the exclusive representative in violation of the MMBA.”

  1. This decision drew a dissent from member Dowdin. It was her first dissent as a Board member and only the 3rd dissent in a decision this fiscal year. (Both the other dissents were by member Neuwald. See PERB Decision Nos. 2058 and 2094.) Dowdin argued that merely informing employees of the rescission option did not interfere with the role of the exclusive representative since Aguirre’s goal was not to change the negotiated contract, but to correct a mistake.
  2. I agree. Take, for example, a situation where the contract provides employees with 10 hours of vacation a month. By mistake, an employee receives 30 hours one month. Does the employer have to bargain with the union before it can correct the mistake? I think not. (Arguably, how the time is taken back may be negotiable as an “effect” but the decision itself, in my opinion, is not). In this example, the employer is not changing the terms and conditions of employment; namely, an employee’s entitlement to 10 hours of vacation a month. The employer is merely insisting on that condition by correcting a mistake.
  3. In addition, I thought the majority too easily dismissed Aguirre’s argument that he was acting in his capacity as the City Attorney as opposed to acting in the role of the employer. As an illustration, let’s say in a prosecution for workers’ compensation fraud a District Attorney’s Office seeks restitution from the defendant. Let’s say the defendant happens to be an employee of the county. Does that fact mean that the DA must bargain with the union during this criminal proceeding in order to ask for the money back? Again, I think not. In this example, the DA is acting in his official capacity as opposed to an employer for purposes of collective bargaining. Granted, the situation in this case is slightly different, since this was not a criminal proceeding and Aguirre's role as City Attorney versus employer is much more blurred.  However, I thought the argument that Aguirre was acting in his capacity to enforce city laws was persuasive. Certainly, as I read the facts, it was not Aguirre's intent to bargain with employees in order to change a contractual provision. He was merely attempting to correct a mistake; a mistake that appeared to be undisputed.
  4. Given how much litigation has already occurred in San Diego on this issue, I wouldn’t be surprised if this case is appealed. So it's not over yet.

Wednesday, April 14, 2010

PERB Recognizes Unconstitutionality of Binding Interest Arbitration Under SB 440

County of Sonoma (2010) PERB Decision No. 2100-M (Issued 2/25/10)

(Sorry for the delay, I’ve been in trial for almost a month)

In this case, PERB recognized that it was bound by the court of appeal’s decision in County of Sonoma v. Superior Court (2009) 173 Cal.App.4th 322, review denied. In that case, the court held that SB 440, which requires public agencies to submit to binding arbitration in certain disputes with public safety unions, was unconstitutional. Accordingly, it is not an unfair practice for a public agency to refuse a request for binding arbitration under SB 440, which is codified in Code of Civil Procedure section 1299 et. seq.