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SR - RES-10772 - AMEMENDMENT MEMORANDUM OF UNDERSTANDING RELATING TO HOLIDAY PAYAGENDA ITEM 9�. a March 11, 2014 Meeting �bV C 4 TO: Honorable Mayor and Members of the City C THRU: John Sibley, City Manager FROM: Steven V. Pham, Human Resources/ Employee Re Director E WIFE �Mn ReviewedNer' ed By: City Manager. Finance Dire o To Be Presente y: ns Calendar _ City Mgr Rpts Council Reports _ Legal Affairs Boards /Cmtes _ Public Hrgs Admin Reports Plan/Environ 1. SUBJECT Resolution No. 10772 - A Resolution of the City Council of the City of Orange Amending the Memorandum of Understanding Between the City of Orange and the Orange City Firefighters, Inc. Local 2384 of the International Association of Fire Fighters, AFL -CIO Relating to Holiday Pay and Holiday Pay in Lieu of Time Off. 2. SUMMARY Resolution No. 10772 amends the Memorandum of Understanding between the City of Orange and the Orange City Fire Fighters to ensure that `holiday pay in lieu of time off will continue to be reported to Ca1PERS in the same fashion that the affected employee would have received had he /she taken the holiday off with pay. Additional details are provided under Section 7, "Discussion and Background" below. 3. RECOMMENDATION Approve Resolution No. 10772. 4. FISCAL IMPACT This is an MOU language change only; there is no additional cost since the City has paid and continues to pay and report this form of compensation to Ca1PERS as pension reportable. 5. STRATEGIC PLAN GOAL(S) 1. Provide for a safe community 2. Be a fiscally healthy community 3. Provide outstanding public service G. GENERAL PLAN IMPLEMENTATION N/A ITEM PAGE 03/11/2014 7. DISCUSSION and BACKGROUND On August 19, 2013, CalPERS notified the City's Payroll Manager that a certain form of compensation was not going to be included as part of an employee's pension calculation. This was discovered as part of the retirement application process that several recently sworn fire personnel encountered with CalPERS. CalPERS is questioning the City's practice of reporting the premium pays that are included above base salary for holiday pay as "special compensation" and therefore becoming included as "PERS- reportable" for retirement purposes. The City pays to employees and reports to PERS as compensation the dollar amount of holiday pay whenever a fire employee works on a holiday or converts his unused holiday time to compensation. In doing so the City uses an hourly pay rate that includes base pay and premiums such as Paramedic Bonus and Educational Incentive. However, these premiums are no longer being accepted by CalPERS as "special compensation" (i.e., "PERS- able ") when taken as `holiday pay in lieu of time off because they are not defined as part of holiday pay in the MOU. It should be noted that the City has been following the same practice of how it pays and reports the value of holiday pay including holiday pay in lieu of time off since at least 1986, and this practice has never been identified as a problem during past CalPERS audits. This practice is also commonly followed in many local agencies throughout the state. The City, through its Chief Negotiator, and the Fire Union have recently agreed to amend the existing Memorandum of Understanding (MOU) with the Fire Union (Local 2384). This amendment will reflect that `holiday pay in lieu of time off is being calculated in a manner that is designed to provide each affected employee the exact same compensation he /she would have received had he /she taken the day off on a holiday with full pay. If approved, the attached contract amendment specifies that holiday pay, including holiday pay in lieu of time off, would continue to be calculated and paid based upon the individual's base salary plus all attendant forms of special compensation. City staff has contacted and received approval from the legal staff at CalPERS that the language agreed to by both the City and the Fire Union, as incorporated in the attached Resolution, would be acceptable to CalPERS. 7. ATTACHMENTS • Resolution 10772 RESOLUTION NO. 10772 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ORANGE AMENDING THE MEMORANDUM OF UNDERSTANDING BETWEEN THE CITY OF ORANGE AND THE ORANGE CITY FIREFIGHTERS, LOCAL 2384 OF THE INTERNATIONAL ASSOCIATION OF FIRE FIGHTERS, AFL -CIO RELATING TO HOLIDAY PAY AND HOLIDAY PAY IN LIEU OF TIME OFF WHEREAS, there presently is in full force and effect a labor contract (i.e., "Memorandum of Understanding" or "MOU ") between the City of Orange, hereinafter referred to as "City," and the Orange City Firefighters, Inc., Local 2384, International Association of Firefighters, AFL -CIO, hereinafter referred to as the "Fire Union," that sets forth wages, hours, and other terms and conditions of employment of employees represented by the Fire Union for the period between July 1, 2012 and June 30, 2015; and WHEREAS, Article IX, Section 9.2 provides that fire suppression personnel shall be entitled to receive "holiday pay in lieu of holiday time off ...pursuant to policies established by the Fire Department and the Fire Union "; and WHEREAS, for the past several years, through and including the present time, this holiday pay in lieu of time off (holiday pay) has been compensated at the same rate and in the same amount an employee would have received had he /she taken the day off as a paid holiday, which compensation included the individual's base salary plus all attendant forms of premium pay or other additional cash compensation entitled the employee in return for services rendered; and WHEREAS, at all such times, the City reported to CAPERS as compensation earnable this holiday pay, as calculated above, in accordance with Section 20636(c)(6) of the California Government Code and Section 571(a)(5) of the Regulations promulgated by CalPERS; and WHEREAS, in August 2013, Ca1PERS notified the City that it was only treating the portion of the holiday pay calculated based upon the individual's base pay as compensation earnable; and WHEREAS, CAPERS informed City staff that a viable option to remedy the situation would be for the City to amend the applicable MOU "to include the details on what is used in the calculations of the holiday pay "; and WHEREAS, the parties desire to satisfy the concerns of Ca1PERS in the manner described above in the previous paragraph so as to cause the entire holiday pay to 1