3W N OF
to8sp�os COUNCIL AGENDA REPORT
DATE: November 27, 2013
MEETING DATE: 12/2/2013
ITEM NO:
TO: MAYOR AND TOWN COUNCILf
FROM: GREG LARSON, TOWN MANAG 04'x/'►✓
SUBJECT: LABOR AGREEMENT WITH AFSCME
RECOMMENDATION:
Approve a labor agreement between the Town of Los Gatos and Association of Federal, State,
County and Municipal Employees (AFSCME) consistent with the package proposal of
November 12, 2013 and authorize the Town Manager to execute the Memorandum of
Understanding.
BACKGROUND:
In accordance with the Town's Employer- Employee Relations Resolution No. 1974 -41,
representatives of the Town and AFSCME have met and conferred in good faith and
within the scope of representation in an effort to reach agreement for successor
Memoranda of Understanding. The Memoranda of Understanding is a labor agreement
that identifies specific terms and conditions of employment applicable to the employees
represented by that agreement.
DISCUSSION:
As a result of difficult economic conditions experienced nationally and regionally, the
Town faced budgetary challenges during the last six fiscal years and addressed those
challenges by eliminating positions, freezing salaries, implementing unpaid furloughs and
reducing benefit - related costs.
Specific to wages, employees represented by AFSCME received no salary increases for
five of the past six years and participated in unpaid furloughs for five consecutive years, as
did other non -sworn employees.
PREPARED BY: Rumi Portillo, Human Resourcese6 i c
Reviewed by:, Assistant Town Manager Town Attorney
Q \Usm\rportillo\Desktop \TC AFSCME Report for Dec 2 2013.doc
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: LABOR AGREEMENTS WITH AFSCME
November 27, 2013
A summary of non -sworn Town -wide salary adjustments is reflected on the following
chart:
Wage Adjustments
Unpaid
Furloughs
Non -sworn Employee Groups
(including AFSCME)
Management
FY 2008/09
0%
0%
FY 2009/10
3%
0 %*
-1.8%
FY 2010/11
0%
0%
-1.0%
FY 2011/12
0%
0%
-1.8%
FY 2012/13
0%
0%
-1.8%
FY 2013/14
0%
0%
-1.8%
Six -Year Period 3% 0% -8.2%
*Note: For FY 2009/10, Management waived a 2% base wage increase as a budget
reduction action in lieu of an unpaid furlough.
After the current year's budget was adopted, the prior year's budget (FY 2012/13) was
reconciled and a positive year -end fund balance was identified. The positive year -end fund
balance resulted from revenues exceeding projected expenditures.
As this trend of increasing revenues is projected to continue, it is anticipated that the
current year's budget may be adjusted at the mid -year budget review to reflect that certain
revenues are exceeding earlier estimates, largely due to the economic recovery. Based upon
this information, the AFSCME package includes the rescission of the current unpaid
furlough, with the costs to be absorbed from the FY 2012/13 year -end fund balance. On a
related note, the AFSCME package includes a one -time paid leave day for the Veterans'
Day unpaid closure that had already been implemented.
In recognition of the cooperative efforts and concessions including the wage freezes and
furloughs made by AFSCME throughout the economic downturn, the package includes a
one -time lump sum bonus of 1.5 %. The year -end fund balance from FY 2012/13 is
sufficient to pay for the bonus, thus there is no impact to the current fiscal year budget.
The AFSCME package also includes future wage increases of 2% for FY 2014/15 and
2% for FY 2015/16. From the Town's perspective, establishing the term of the labor
agreement through FY 2015/16 assists in budgetary planning by identifying and capping
future salary costs.
PAGE
MAYOR AND TOWN COUNCIL
SUBJECT: LABOR AGREEMENTS WITH AFSCME
November 27, 2013
Alignment of Medical Premiums
For purposes of equity and consistency, it has been the Town's objective to standardize
the benefit contributions across the employee groups. Although most of the employee
contributions are aligned, the AFSCME package includes two medical premium changes
that meet the Town's objectives.
Changes to Medical Premiums in the AFSCME package include:
I ) Dependent Medical Coverage: AFSCME employees will pay for dependent medical
coverage based on a percentage share of the medical premium. Currently the cost for
AFSCME dependent coverage is capped at $40 /month for one dependent and
$100 /month for two or more dependents. Effective January 1, 2015, the cap is no
longer applicable and employees will share 10% of the Kaiser North premium for
dependents.
It should be noted that the Town will continue to contribute 100% of the Kaiser North
rate for the employee and the shared cost will apply only to the additional cost for
dependent coverage. The 10% share of dependent premiums is competitive in
comparison to other employers' plans.
2) Alignment of Medicare- Supplemented Rates: When an individual becomes Medicare -
eligible, the medical premium payable to CalPERS drops to a lower rate. However,
the Town's contribution does not drop to match the lower Medicare rate, but remains
at the higher non - Medicare rate. This allows Medicare - eligible employees to apply
the extra amount to a premium plan more expensive than Kaiser North, resulting in a
higher benefit than allowed for active employees. More significantly, this increases
the Town's actuarial liability, as the higher benefit is included in the liability
assumptions.
The alignment to Medicare- supplemented rates is consistent with standard practices
of other employers and follows the recommendations of the Town's actuaries.
Additional Economic Items Included in the AFSCME Package
The AFSCME package also includes funding for additional protective clothing to improve health
and safety during inclement weather. Additionally, an incentive has been added for employees to
maintain a California Class "A" license for the operation of heavy equipment. The total cost for
both items is projected at less than $5,000 per year and will be absorbed in the existing
operational budget.
PAGE 4
MAYOR AND TOWN COUNCIL
SUBJECT: LABOR AGREEMENTS WITH AFSCME
November 27, 2013
CONCLUSION:
As the AFSCME Package Proposal of November 12, 2013 has been prepared within the
parameters provided to Town's negotiators by the Town Council and has been ratified by the
AFSCME membership, it is recommended that the Package Proposal be approved and that the
Town Manager be authorized to execute the Memorandum of Agreement.
FISCAL IMPACT:
Cost of AFSCME Package
TOTAL $20,500 $25,600 $32,700
Summary of AFSCME Package =
$20,500 one -time and $58,300 ongoing for the three -year term of the agreement.
For Reference:
Total Townwide Payroll $17.74M $18.32M $19.38M
all Units
Notes
'FY 2013/14 Costs will be paid from the prior year (FY 2012/13) year -end fund balance.
'The furlough rescission cost of $24K is offset by $19K from employees using personal
leave balances during the year -end holiday closure, leaving a remaining cost of $5,000.
'The Veterans' Day Closure paid leave hours does not directly add costs to payroll.
Costs Related to Other Employee Groups
A staff report is being prepared for the December 9, 2013 agenda for the Town Council to
consider the furlough rescission and pay actions comparable to AFSCME for unrepresented
Confidential and Management employees. Negotiations with the Town Employees' Association
have not yet concluded.
Attachment: AFSCME Negotiations Town of Los Gatos Package Proposal, November 12, 2013.
FY 2013/14
(one -time costs)'
FY 2014/15
FY 2015/16
Furlough rescission
$5,000
1.5% Lump Sum Bonus
$15,500
Veteran's Day Closure
n/a
General Wage Increase
n/a
$20,700
$21,100
CalPERS Added Cost
n/a
$4,900
$11,600
TOTAL $20,500 $25,600 $32,700
Summary of AFSCME Package =
$20,500 one -time and $58,300 ongoing for the three -year term of the agreement.
For Reference:
Total Townwide Payroll $17.74M $18.32M $19.38M
all Units
Notes
'FY 2013/14 Costs will be paid from the prior year (FY 2012/13) year -end fund balance.
'The furlough rescission cost of $24K is offset by $19K from employees using personal
leave balances during the year -end holiday closure, leaving a remaining cost of $5,000.
'The Veterans' Day Closure paid leave hours does not directly add costs to payroll.
Costs Related to Other Employee Groups
A staff report is being prepared for the December 9, 2013 agenda for the Town Council to
consider the furlough rescission and pay actions comparable to AFSCME for unrepresented
Confidential and Management employees. Negotiations with the Town Employees' Association
have not yet concluded.
Attachment: AFSCME Negotiations Town of Los Gatos Package Proposal, November 12, 2013.
AFSCME Negotiations
TOWN OF LOS GATOS PACKAGE PROPOSAL
November 12, 2013
The Town offers the following comprehensive package proposal to AFSCME in this summary form for a term of
three years (from July 1, 2013 to June 30, 2016). This package proposal is offered as a whole and therefore must
be accepted or rejected in its entirety.
1. Unpaid Furlough: Eliminate unpaid furlough for 2013 (refund 17.6 hours in cash or leave; stop further
deductions of 22.4 hours). In lieu of the unpaid furlough, employees will use their own leave accruals or
the furlough refund to cover the year -end closure of 40 hours.
2. Employee Appreciation Lump Sum Payment: One -time lump sum of 1.5% paid in cash upon MOU
acceptance (payable as cash in December 2013).
3. Employee Appreciation Hours: One -time paid Veteran's Day Closure of 8 hours for November 11, 2013
(or additional 8 hours of personal leave if worked).
4. General Wage Increases: 2% July 1, 2014; 2% July 1, 2015
S. Heavy Equipment Differential: $30 per month for employees who maintain a Class A license.
6. Uniform: Add rain jacket, rain pants and cold - weather jacket. Uniforms will be provided annually by
November 1.
7. Grievances: Duplicate the Grievance section from the Personnel Rules and copy to the MOU; add a final
appeal step to the Personnel Board
8. Medical Premiums: Effective January 2015, Town will pay 90% and employee will pay 10% of dependent
coverage (eliminate the $40/$100 cap). Employee remains fully paid at the Kaiser North rate.
9. Medicare: Upon retiree's Medicare - eligibility, align Town contributions to the CalPERS Medicare
Supplemented rates for Kaiser North.
10. MOU Language Updates (no change to existing benefits):
• Section 9 Nondiscrimination — update consistent with law
• Section 13 CalPERS Benefits — include PEPRA language
• Section 14 Health and Welfare Benefits —add language allowing changes for qualifying events
• Section 49 Contracting Out— delete language re meeting between the parties (completed)
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