1toW" of MEETING DATE: 12/9/2013
ITEM NO:
zos cp�os COUNCIL AGENDA REPORT
DATE: December 5, 2013
TO: MAYOR AND TOWN COUNCIL
FROM: GREG LARSON, TOWN MANAGER
SUBJECT: COMPENSATION AND BENEFITS UPDATES FOR UNREPRESENTED
EMPLOYEES AND CONDITIONAL AUTHORITY TO PROCEED WITH A
LABOR AGREEMENT WITH THE TOWN EMPLOYEES' ASSOCIATION
RECOMMENDATION:
1) Approve compensation and benefits updates for unrepresented employees consistent with
the labor agreement adopted between the Town of Los Gatos and the Association of
Federal, State, County and Municipal Employees ( AFSCME).
2) Approve an Appreciation Bonus of $250 for Hourly Unbenefitted Employees, payable as
a one -time bonus in December 2013.
3) Authorize the Town Manager to negotiate a labor agreement with the Town Employees'
Association (TEA) materially consistent with the terms and conditions of the agreement
reached with AFSCME and authorize the Town Manager to execute the Memoranda of
Agreement between the Town of Los Gatos and TEA, if ratified by TEA.
BACKGROUND:
On December 2, a labor agreement with AFSCME was approved by the Town Council. The staff
report discussing the AFSCME labor agreement stated that a report was being prepared for the
December 9, 2013 Town Council meeting to consider terms comparable to the AFSCME
agreement for unrepresented Confidential and Management employees. Unrepresented
employees do not collectively bargain and serve as At -Will employees. Unrepresented
employees are those who are Confidential hourly, salaried Management, Council Appointees or
temporary /unbeneffited.
The staff report also stated that negotiations with the Town Employees' Association (TEA) were
underway but had not yet concluded.
PREPARED BY: Rumi Portillo, Hum , R y u i r
Reviewed by: Assistant Town Manager Town Attorney Finance
C:AUsers \rportilloADesktopATC Unrep and TEA Report for Dec 9 2013.doe
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: COMPENSATION AND BENEFITS UPDATES FOR UNREPRESENTED
EMPLOYEES AND CONDITIONAL AUTHORITY TO PROCEED WITH A
LABOR AGREEMENT WITH THE TOWN EMPLOYEES' ASSOCIATION
December 5, 2013
This is the follow -up to the December 2 staff report for the purpose of addressing the
unrepresented Confidential and Management employees, as well as TEA.
DISCUSSION:
The December 2 staff report provided the following context for the labor agreement reached
between the Town and AFSCME:
Wages During the Economic Downturn
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 impacts to the non -sworn employee groups include:
• For non -sworn non- management employees, wages have been frozen for five of the past
six years.
• For management employees, salaries have been frozen for six straight years.
• In the last six -year period, nons -worn employees contributed a cumulative -8.2% in wage
reductions from unpaid furloughs. (Management waived a budgeted pay increase as an
offset in the first year of furloughs.)
Year -End Fund Balance for FY 2012/13
An unpaid furlough had been imposed for FY 2013/14 to balance a projected budget gap.
However, 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. The identified balance is
sufficient to absorb the reversal of the unpaid furlough and a one -time bonus, with remaining
funds to address other Town priorities.
Projections and Future Planning
A trend of increasing revenues is projected to continue and 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.
The Town continues to be cautious and fiscally conservative, including projections for increased
CalPERS pension contributions and increased health benefit costs. However, the five -year
forecast also reflects an improving economic environment with balanced budgets.
PAGE
MAYOR AND TOWN COUNCIL
SUBJECT: COMPENSATION AND BENEFITS UPDATES FOR UNREPRESENTED
EMPLOYEES AND CONDITIONAL AUTHORITY TO PROCEED WITH A
LABOR AGREEMENT WITH THE TOWN EMPLOYEES' ASSOCIATION
December 5, 2013
Multi -Year AFSCME Agreement
After careful consideration of the economic conditions, the Town completed several months of
negotiations with AFSCME and reached a multi -year agreement.
The labor agreement, as approved on December 2, include the following economic items:
• Rescission of the current FY 2013/14 Unpaid furlough program;
• One -time paid holiday for the closure already implemented for Veterans Day;
• One -time Appreciation Bonus of 1.5% to be paid in December 2013, in recognition of the
wage freezes, unpaid furloughs and benefits concessions;
• General wage adjustments of 2% in FY 2014/2015 and 2% in FY 2015/16.
The AFSCME package also included the following benefit concessions:
Further cost- sharing of dependent medical premiums effective January 2015. The cost of
dependent care coverage will be shared 90% by the Town and 10% by the employee.
For Medicare- eligible retirees, the Town's contribution will be reduced to align to the
CalPERS' Medicare - Supplemented rates for Kaiser North.
Application to Unrepresented Employees
The unrepresented employees are similarly situated to AFSCME, in that they participated in six
years of wage freezes, unpaid furloughs and benefits concessions. Thus, for purposes of interna'.
equity and consistent benefits administration, it is recommended that the same economic terms
be applied for unrepresented Confidential and Management employees.
The applicable terms include the rescission of the unpaid furlough program for FY 2013/14, one-
time paid leave for the 2013 Veterans' Day closure, one -time 1.5% Appreciation Bonus payable
in December 2013, and 2% wage adjustments for FY 2014/15 and FY 2015/16. Additionally, it is
recommended that the benefits concessions for dependent care and the Medicare- supplemented
rate alignment also be applied for unrepresented Confidential and Management employees.
Unbenefitted HourlyEm Employees
Supplemental staff who work in an hourly capacity with fewer than 20 hours a week are also in
the unrepresented group and serve in an At -Will and unbenefitted capacity. Hourly rates for the
unbenefitted employees are generally benchmarked to the full -time counterpart positions and as
such, the hourly rates have also been frozen for five of the past six years. In recognition of this, a
modest one -time Appreciation Bonus is included as a pay action to be implemented for those
who are regularly assigned to work.
PAGE 4
MAYOR AND TOWN COUNCIL
SUBJECT: COMPENSATION AND BENEFITS UPDATES FOR UNREPRESENTED
EMPLOYEES AND CONDITIONAL AUTHORITY TO PROCEED WITH A
LABOR AGREEMENT WITH THE TOWN EMPLOYEES' ASSOCIATION
December 5, 2013
Status of TEA
The Town's negotiators and TEA representatives met and conferred in good faith in 2012 but did
not reach agreement on a successor MOU. For that reason the MOU has remained expired since
June 30, 2012. Negotiations resumed in August 2013 and labor discussions have been ongoing
since that time.
A final proposal by the Town is currently under vote with the TEA membership. The terms
included in the package proposal resulted from good faith negotiations between the Town and
TEA and are specific and relevant to the TEA bargaining group and the economic parameters are
materially consistent with the package approved for AFSCME. Although the vote by the TEA
membership is not yet complete, the conditional authorization for an agreement with TEA will
allow staff to proceed with immediate implementation of the agreement in an expedited manner,
if ratified by the TEA membership.
If the final proposal by the Town is not ratified by the TEA membership, the terms and
conditions of employment remain status quo until further action is taken by the parties. Status
quo includes continuation of the FY 2013 /14 furlough program. Status quo would also mean that
any incentives or concessions in the proposal will not be implemented, pending further Council
direction.
CONCLUSION:
For consistency in the administration of benefits and for reasons of internal equity, it is
recommended that the applicable terms contained in the AFSCME labor agreement be
implemented for the unrepresented Confidential and Management employees, to include the
rescission of the unpaid furlough program for FY 2013/14, one -time paid leave for the 2013
Veterans' Day closure, 1.5% bonus payable in December 2013, 2% wage adjustments for FY
2014/15 and FY 2015/16. Additionally, it is recommended that the benefits concessions for
dependent care and the Medicare - supplemented rate alignment also be applied to the
unrepresented Confidential and Management employees.
Further, if the TEA membership ratifies an agreement that is materially consistent with the
package described in this staff report, it is recommended that the Town Manager be authorized to
negotiate and execute the Memoranda of Understanding with TEA.
PAGE 5
MAYOR AND TOWN COUNCIL
SUBJECT: COMPENSATION AND BENEFITS UPDATES FOR UNREPRESENTED
EMPLOYEES AND CONDITIONAL AUTHORITY TO PROCEED WITH A
LABOR AGREEMENT WITH THE TOWN EMPLOYEES' ASSOCIATION
December 5, 2013
FISCAL IMPACT:
One -time Costs
The following are the total one -time costs for the Unpaid Furlough and 1.5% Bonus for all non -
sworn employee groups, including the AFSCME costs as previously authorized and additionally
assuming that TEA ratifies the agreement.
As shown on the charts, the furlough rescission is offset by personal leave hours used by
employees to cover the year -end holiday closure. The combined cost of the furlough rescission
and the one -time bonus of approximately $180K for all non -sworn employees will be absorbed
from the prior year -end fund balance.
Unpaid Furlough Hours Offset by Leave Usage for 2013 Holiday Closure
AFSCME TEA Confidential Mgmtl TOTAL
number of positions SS S7 12 24 108
Rescind Furlou€
Offset by Leave
Appreciation Bonus
AFSCME TEA Confidential Mgmt TOTAL
base
One -Time Bonus of $250 for Unbenefitted Hourly Employees
The cost of a one -time bonus for unbenefitted hourly employees is approximately $5,000.
General Wage Increases for FY 2014/15 and FY 2015/16
Based on the non -sworn salaries and CaIPERS rates assumed in the 5 -year forecast, the cost of a
2% increase in FY 2014/15, including salary and CalPERS costs, is approximately $230K,
resulting in a total non -sworn payroll of $11.9M.
The increase in FY 2015/16 is an additional $260K, resulting in a total payroll of $12.5M
resulting in a total non -sworn payroll of $12.5M.