HomeMy WebLinkAboutID-2716
City of Palo Alto (ID # 2716)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 4/9/2012
April 09, 2012 Page 1 of 3
(ID # 2716)
Summary Title: Labor Guiding Principles
Title: Recommendation from Policy & Services Committee to Approve Labor
Guiding Principles
From: City Manager
Lead Department: Human Resources
Recommendation
Staff and the Policy and Services Committee recommend that the Council approve
the attached Labor Guiding principles.
Background
The concept of Labor Guiding Principles arose when the City modified its Impasse
procedure last year to incorporate a new state law allowing employee
organizations to request nonbinding fact finding after impasse is declared. Staff
originally proposed incorporating key principles as a reference for City in making
employee compensation decisions into the Impasse procedure, requiring the fact-
finder to consider these principles when making a recommendation. However,
after several discussions staff decided that the concept of guiding principles
applied to many labor related issues and should not be limited to impasse. Thus,
Staff proposed draft Labor Guiding Principles as a stand-alone document to the
Policy & Services Committee on February 14, and after review and discussion
brought a second draft with revisions on March 13 to provide for public,
employee and labor input to Council before adoption of the Principles. The
Committee recommends Council consideration and adoption of the attached
Labor Guiding Principles.
Discussion
April 09, 2012 Page 2 of 3
(ID # 2716)
One purpose of Labor Guiding Principles is to establish a transparent policy
framework to guide labor relations. The City has 7 recognized bargaining units
and one unrepresented group of managers and professionals. The contract terms
and specific issues vary from unit to unit. While the City is required to meet and
confer in good faith to set compensation and terms and conditions of work with
each bargaining unit, the City values labor’s input and strives to work
collaboratively with all employees and labor to solve problems and develop
creative solutions to meet bargaining objectives.
The Labor Guiding Principles may also help all bargaining teams by providing a
common understanding between all the parties involved in labor negotiations;
allowing them to look at how specific proposals fit with overall Council objectives.
Given that the City continues to face budget challenges driven in part by
significantly rising employee benefit costs, the Principles support a balance
between the need for strong financial stewardship and maintenance of a
productive and positive work environment.
While each of the Labor Guiding Principles are important, Principle #3, Timing of
Negotiations, was the focus of much discussion at the Committee level. Labor
expressed some concern that to achieve this goal bargaining time would be
limited. Committee members expressed strong desire to complete bargaining for
a successor contract by the time the current contract expires yet not truncate the
process. Language was added by the Committee stating the parties should work
together to begin negotiations at such time that allows for sufficient bargaining in
good faith in order to reach agreement by the time the current contract expires.
That will require, at a minimum, starting formal negotiations earlier than in the
past.
The Council is not required to adopt guiding principles for labor negotiations.
However as the challenging fiscal environment continues at the City, State and
national levels, it is important for City staff and labor to partner to explore and
find solutions to these challenges, at the same time enhancing collaboration and
communication. Guiding Labor Principles can help create a uniform, clear
framework to guide labor relations and the efforts of staff and labor. The
Committee unanimously recommended the attached Labor Guiding Principles for
consideration and adoption by the Council.
April 09, 2012 Page 3 of 3
(ID # 2716)
Environmental Review
This is not a project under the California Environmental quality Act (CEQA).
Attachments:
: Revised Labor Principles 3-26-12 (PDF)
: 03-13-12 LABOR GUIDING PRINC EXCERPT (PDF)
: CMR ID#2643 3-13-12 (PDF)
: CMR ID#2550 2-14-12 (PDF)
Prepared By: Sandra Blanch, Interim Director, Human Resources
Department
Department Head: Sandra Blanch, Interim Director, Human Resources
Department
City Manager Approval: ____________________________________
James Keene, City Manager
Revised 3/26/12
Labor Guiding Principles
Palo Alto City Council
Adopted _____
To help maintain and support stronger working relationships between the City and Labor
that are grounded in the standards of good faith bargaining, transparency, open
communication and mutual respect, the Council hereby adopts the following principles to
provide Labor, employees and the public with a policy framework of principles intended
to guide the City’s labor relations policies and priorities:
1. City Services/Programs/Activities: The City’s core mission is to provide services,
programs, and activities that align with the priorities of the public and the City
Council; levels of employee compensation should support the City’s long-term ability
to continue providing those services.
2. City Finances: The City should be able to meet the cost of any compensation
commitment from current and projected on-going City revenues.
3. Timing of Negotiations: The City shall, to the maximum extent possible, reach
agreement on the successor MOA with recognized employee organizations on matters
within the scope of representation prior to expiration of their existing MOA. The City
will work with employee groups to set an appropriate starting time for negotiations.
4. Total Compensation: In making compensation decisions, the City shall consider the
total costs of a position including salary, pension, and all other benefits and shall
communicate such information to all employees, labor and the public.
5. Equity Across Employee Groups: The City should strive to set and make similar
structural changes to compensation and benefits for all employee groups, while
recognizing that some flexibility may be required to fairly address issues specific to
individual units and/or achieve the objectives of other guiding principles.
6. Recruitment & Retention: When economically feasible, the City’s compensation
should be set at levels sufficient to recruit, train and retain qualified employees who
are committed to the City’s goals, programs and delivery of high quality services. The
City should pursue hiring and training strategies that further the City’s goal of finding
and growing staff that are critical to maintaining its goals, programs, and services.
7. Transparency: The structure and components of compensation of City employees
should be easy for Councilmembers, employees, labor and the public to understand,
and as efficient as possible for staff to administer.
8. Management of Increasing Benefit Costs: The City should pursue short term and
long term strategies to curtail increasing employee benefit costs. It should move away
from providing benefits that place the burden on the City to pay the cost of automatic
Revised 3/26/12
increases and toward benefit structures that require negotiations to determine how
much and who will pay for such costs.
9. Innovation in Employment and Compensation: Providing broader and more
creative choices regarding benefits may further the concepts set forth in Guiding
Principles 1-8. The City should consider innovative alternatives to traditional models
of public employment and public employee benefits such as Governor Brown’s 2011-
2012 public employee pension proposal and other innovative alternatives including,
for example, but not limited to hybrid pension plans, cafeteria plans, scaled
compensation in lieu of guaranteed benefits, benefit buyout options, and similar ideas.
POLICY AND SERVICES COMMITTEE
Regular Meeting
March 13, 2012
Chairperson Holman called the meeting to order at 7:05 p.m. in the
Council Conference Room, 250 Hamilton Avenue, Palo Alto, California.
Present: Holman (Chair), Espinosa, Klein, Schmid
Absent:
2. Recommendation Regarding Approval of Labor Guiding Principles.
Sheila Tucker, Assistant to the City Manager, reminded Committee
Members this item was heard in February. She indicated Staff was
directed to make revisions to the Principles. She stated Marci Scott
would present the suggested changes.
Marci Scott, Acting Assistant Human Resources Director, had two areas
of comment: 1) an overview of the main changes made since the last
meeting; and 2) feedback from one labor group. She reported the
introductory paragraph had been changed to provide an overview of
the purpose of the Guidelines, and to state the goal of maintaining
positive and strong relationships with labor. She indicated Staff and
labor had maintained open communication and continued to work
together to solve problems over the last few years. She stated there
were minor changes, but she would focus on four areas of major
adjustment. She said Guiding Principle No. 3 was probably the most
important discussion item at the last meeting. She indicated the new
language was clear and direct in stating that successor contracts would
be finalized by the expiration of the current contract. She stated this
would not necessarily mean a shorter process, but rather earlier start
times. She reported Staff was re-evaluating resource needs to make
this happen, and proposed that this Guiding Principle become effective
for contracts expiring in Fiscal Year 2013 and beyond. She indicated
Guiding Principle No. 5 was newly added regarding equity across
employee groups. She noted Guiding Principle No. 6 was recruitment
and retention, which had a few changes focusing on recruiting, training
and retaining qualified employees committed to the City's goals and
delivery of services. She said this would be an increasingly important
element to discuss in the future. She reported Guiding Principle No. 9,
innovation in employment and compensation, now contained a
reference to Governor Brown's Public Employee Pension proposal as an
example of an innovative reform of the City's pension plan. She stated
she sent a copy of the packet to Labor prior to the February 14
meeting, and sent a communication to all labor groups last Thursday.
She received feedback from one labor group, and was in a discussion
today with Service Employees International Union (SEIU)
representatives in the monthly labor management meeting. She
indicated the group's main concern was their belief that the City
conveyed a disinterest in the bargaining process, specifically in Guiding
Principle No. 3. She reported they discussed the City's commitment to
the meet-and-confer process, the City's proposal to phase in this
provision, and the City's intention not to shorten or limit the
bargaining process.
Council Member Espinosa asked if the labor group suggested language
for changing Item No. 3.
Ms. Scott stated they did not.
Brian Ward, SEIU Representative, questioned why the City would need
these Guiding Principles, when they had worked well together and the
Guiding Principles did not contain any objectionable ideas. Regarding
Item 3, protracted negotiations, he felt the City was saying it did not
want protracted negotiations. He asked how they were to work
collaboratively. He explained interest-based bargaining. He indicated
SEIU wanted to understand the purpose of the Guiding Principles in
order to report to its members.
Council Member Klein stated the general idea of the Guiding Principles
was to express the general principles to which everyone could agree.
He supported No. 3 whether it was a Guiding Principle or policy,
because the current system was in the union's favor. He explained the
lack of savings to the City due to the recent negotiations with the
Public Safety unions. He thought both sides should have an incentive
to complete negotiations by the date of the contract expiration.
Mr. Ward agreed. He thought they were in agreement with all of the
Principles. He asked if the Guiding Principles needed to be exerted
and drawn out. He felt it was a valid point that the City did not realize
a savings in extended negotiations. He asked what would happen if
negotiations extended past the contract expiration date. He indicated
union members wanted to know if there was a "stick" coming.
Council Member Klein indicated there would be further changes if the
economic situation continued and referred to Governor Brown's 12
principles.
Mr. Ward stated lobbying efforts should be concentrated on the Public
Employees' Retirement System (PERS) to effect changes.
Council Member Schmid stated the term "protracted negotiations"
implied an emotional content, which was not true. He noted Molly
Stumps' statement at the prior meeting that it was difficult to begin
serious negotiations until the budget process began with the long-
range financial forecast. He said waiting until the budget process
began would provide approximately four months for negotiations,
which would not be enough time for serious negotiations. He asked if
it was possible to begin bargaining earlier, and if some issues could be
dealt with prior to the budget process. He suggested that Guiding
Principle No. 3 not start with the term protracted, but contain
language acknowledging the fact that negotiations involve important
long-term issues for both sides and could take some time to resolve.
He thought the ending time was important.
MOTION: Council Member Klein moved, seconded by Council Member
Espinosa to
Change Labor Guiding Principle No. 3; 1) by removing the first
sentence, Protracted negotiations creates uncertainty for the City and
employees, and 2) make the beginning sentence: The City shall to the
maximum extent possible reach agreement on the…
Council Member Klein thought this was an important policy as he noted
earlier. He believed the City could begin negotiations earlier and
disagreed with the idea of needing the long-range forecast to begin
bargaining. He noted historically not all labor contracts ended on June
30, and there was no legal requirement for union contracts to end on
June 30.
Council Member Espinosa noted that Guiding Principle No. 1 and No. 3
did not begin with "the City shall" as the other Principles did. He
pointed out there had been broad support for formalizing guiding
principles.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF
THE MAKER AND SECONDER TO include in Labor Guiding Principle
No. 3; The City will work with the employee groups to set the
appropriate starting time for negotiations.
Council Member Espinosa thought people supported this type of
language, because it provided a clear understanding that the City was
not attempting to truncate in any way the amount of time for
negotiations.
Ms. Scott explained that the City was preparing for negotiations with
SEIU, and SEIU was open to the City's goal of starting negotiations
earlier. She said Staff planned to discuss the budget and financials,
and set a foundation for moving forward. She indicated discussions
thus far had been positive.
Chair Holman supported the Motion and appreciated the Amendment.
She felt the Amendment highlighted the importance of having a fair
and collaborative process.
Council Member Klein expressed concerns over Principle No. 4 and
Principle No. 7. He noted his conversation with a City employee
regarding increased compensation. He referenced Council Member
Shepherd's suggestion of publicizing true compensation costs. He
referenced the language in Principle No. 4. He suggested the City
needed to publicize more or in a better way. He felt the average
employee did not view the City's increased payments to health
insurance and pension as being increases in compensation.
Ms. Scott reported Staff had discussed this issue and was reviewing a
means to produce an annual compensation statement. She thought
employees did not understand the City's contribution to pension She
said Staff was interested in providing a statement which would list
each benefit.
Council Member Klein recalled discussions during negotiations with
Public Safety people and SEIU concerning listing all benefits. He asked
if Staff could suggest language for the Principle, whether it was a
combination of their discussions or language contained in Principle No.
7 and Principle No. 4.
Council Member Espinosa inquired if Council Member Klein's goal was
to share total compensation information with employees in a way that
they could understand.
Council Member Klein stated his goal was for employees to understand
their true compensation. He suggested adding language regarding
publicizing compensation information, so that union members and the
general public had an understanding of these costs.
Ms. Scott said this language would provide compensation costs to all
bargaining-unit members and all employees, and indicated Staff could
do this.
Council Member Espinosa expressed concern over using the word
"publicize." He suggested "share" or "communicate."
INCORPORATED INTO THE MOTION WITH THE CONSENT OF
THE MAKER AND SECONDER to add to the last sentence of Labor
Guiding Principle No. 4; and shall communicate information so the
public and employees understand the costs.
Chair Holman indicated these language revisions were for Guiding
Principle No. 4, and asked if there was a revision to Guiding Principle
No. 7.
Council Member Klein did not have any revisions to No. 7.
Chair Holman agreed with Guiding Principle No. 7, but felt they needed
to understand compensation costs as well.
Council Member Espinosa asked if, by "they", Chair Holman meant the
City Council.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF
THE MAKER AND SECONDER to change the first sentence of Labor
Guiding Principle No.7 to; compensation of City Employees should be
easy for Council Members, employees, and the public.
Council Member Espinosa stated this expressed the idea of the Council
also needing to understand the costs.
Chair Holman agreed, and felt this language was inclusive.
Council Member Klein thought No. 7 was slightly different from No. 4
in that No. 7 discussed pay grades.
Council Member Schmid suggested clarifying the language in No. 5
regarding changes in benefits at similar levels to focus on structural
change.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF
THE MAKER AND SECONDER to change the first sentence Guiding
Principle No. 5 to; The City should strive to set and make similar
structural changes to compensation and benefits for all employee
groups.
Council Member Schmid referenced data stating the City had 50
percent of employees within ten years of retirement. He noted the
City had to search for employees to fill senior positions. He thought
the City should hire young people and grow them to fill senior
positions. He suggested a revision to No. 6 to place emphasis on
hiring and training young people with talent.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF
THE MAKER AND SECONDER to change the last sentence Guiding
Principle No. 6 to; that further the City’s goal of finding and growing
Staff that are critical to maintaining.
Molly Stump, City Attorney, thought his point was hiring people earlier
in their career irrespective of chronological age.
Ms. Scott reported Staff was reviewing apprenticeship programs in
order to build and train employees.
Council Member Espinosa was not opposed to the proposed revision to
No. 6, but did not agree with the reasons for the revision.
Council Member Schmid said the City would be filling many retirement
positions. He recalled the previous City Manager stating the biggest
problem was Staff retirements and the City needed to be ready. He
noted the City was in the same position eight years later.
MOTION AS AMENDED PASSED: 4-0
City of Palo Alto (ID # 2643)
Policy and Services Committee Staff Report
Report Type:Meeting Date: 3/13/2012
March 13, 2012 Page 1 of 2
(ID # 2643)
Summary Title: Labor Guiding Principles
Title: Recommendation Regarding Approval of Labor Guiding Principles
From:City Manager
Lead Department: Human Resources
Recommendation
Staff recommends that the Policy & Services Committee review and recommend that
Council approve guiding principles for labor negotiations.
Background
City staff presented a first draft of proposed labor guiding principles on February 14th.
These principles are intended to express the main values that guide bargaining with all 7
bargaining units, which vary in terms of timing of negotiation schedules and specific
issues addressed.
Discussion
Committee members provided feedback at the February 14th meeting, requesting
changes to the language in the principles on Timing of Negotiations, Recruitment &
Retention and Innovation in Employment and Compensation. The Committee also
requested a new principle to incorporate the concept of equity across bargaining
groups.
Staff has edited the proposed guiding principles based on Committee feedback. A new
introductory statement was added as well as minor changes to Guiding Principle 6
(Recruitment & Retention) and Guiding Principle 9 (Innovation in Employment and
Compensation). Most significantly, Committee members requested specific changes to
Guiding Principle 3, Timing of Negotiations. Committee members asked that the
language be clearer and more direct to indicate that successor agreements should be
reached with Labor before expiration of the current Memorandum of Agreement
(MOA). However, given the current workload, staffing levels and active bargaining
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March 13, 2012 Page 2 of 2
(ID # 2643)
tables, a transition period is necessary in order to ensure that the City can implement
this principle. Staff requires additional time to evaluate the resources needed to
effectively meet this expectation and is developing a strategy to satisfy this guideline.
Therefore, staff recommends that Guiding Principle 3 (Timing of Negotiations) be
implemented beginning with MOAs that expire in FY 13.
Conclusion
The Council is not required to adopt guiding principles for labor negotiations. However
as the City continues to face a challenging fiscal environment in the current and future
years, it is important for City staff and Labor to partner to explore and find solutions to
these challenges, at the same time enhancing collaboration and communication.
Guiding principles can help create a transparent policy framework to guide labor
relations and the efforts of staff and Labor.
Attachments:
·-:Labor Guiding Principles 3-13-12 (PDF)
·-:ID#2550 Recommendation Re Approval of Labor Guiding Principles 2-14-12 (PDF)
·-:2-14-12 PS Item 2 Labor Excerpt (PDF)
Prepared By:Elizabeth Egli, Administrative Assistant
Department Head:Sandra Blanch, Interim Director, Human Resources
Department
City Manager Approval: ____________________________________
James Keene, City Manager
2
Packet Pg. 81
Revised 3/13/12
Labor Guiding Principles
Palo Alto City Council
Adopted _____
To help maintain and support stronger working relationships between the City and Labor
that are grounded in the standards of good faith bargaining, transparency, open
communication and mutual respect, the Council hereby adopts the following principles to
provide Labor, employees and the public with a policy framework of principles intended
to guide the City’s labor relations policies and priorities:
1. City Services/Programs/Activities: The City’s core mission is to provide services,
programs, and activities that align with the priorities of the public and the City
Council; levels of employee compensation should support the City’s long-term ability
to continue providing those services.
2. City Finances: The City should be able to meet the cost of any compensation
commitment from current and projected on-going City revenues.
3. Timing of Negotiations: Protracted negotiations create uncertainty for the City and
employees; the City shall reach agreement on the successor MOA with recognized
employee organizations on matters within the scope of representation prior to
expiration of their existing MOA.
4. Total Compensation: In making compensation decisions, the City shall consider the
total costs of a position including salary, pension, and all other benefits.
5. Equity Across Employee Groups: The City should strive to set and make changes
to compensation and benefits at similar levels for all employee groups, while
recognizing that some flexibility may be required to fairly address issues specific to
individual units and/or achieve the objectives of other guiding principles.
6. Recruitment & Retention: When economically feasible, the City’s compensation
should be set at levels sufficient to recruit, train and retain qualified employees who
are committed to the City’s goals, programs and delivery of high quality services. The
City should pursue hiring and training strategies that further the City’s goal of filling
positions that are critical to maintaining its goals, programs, and services.
7. Transparency: The structure and components of compensation of City employees
should be easy for employees and the public to understand, and as efficient as
possible for staff to administer.
8. Management of Increasing Benefit Costs: The City should pursue short term and
long term strategies to curtail increasing employee benefit costs. It should move away
from providing benefits that place the burden on the City to pay the cost of automatic
increases and toward benefit structures that require negotiations to determine how
much and who will pay for such costs.
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Revised 3/13/12
9. Innovation in Employment and Compensation: Providing broader and more
creative choices regarding benefits may further the concepts set forth in Guiding
Principles 1-8. The City should consider innovative alternatives to traditional models
of public employment and public employee benefits such as Governor Brown’s 2011-
12 public employee pension proposal and other innovative alternatives including, for
example, but not limited to hybrid pension plans, cafeteria plans, scaled compensation
in lieu of guaranteed benefits, benefit buyout options, and similar ideas.
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ATTACHMENT B
ID# 2550
Recommendation Regarding Approval of Labor Guiding Principles
2‐14‐12
Recommendation
Staff recommends that the Policy & Services Committee review and recommend that
the Council approve guiding principles for labor negotiations.
Background
The concept of guiding principles for labor negotiations arose in Palo Alto in late 2011
when the City amended its local impasse resolution rules to address the new Meyers‐
Milias Brown Act rule which allows employee organizations to request nonbinding fact‐
finding after impasse is declared and before a local agency may implement the terms of
its last, best and final offer. Staff originally proposed including decision “factors”
describing key considerations for labor negotiations that the fact‐finder would be
required to consider in making recommendations. However, in refining those factors
and discussing the issue with labor, staff ultimately determined that such considerations
are not and should not be limited to impasse resolution. More importantly, approval of
stand‐alone guiding principles gives the Council and the public the opportunity to have a
broader discussion about main values that it wants to guide the City’s approach to labor
issues.
Discussion
The City currently has 7 recognized bargaining units and one unrepresented group of
managers and professionals. While the City is required to engage in the bargaining
process to set compensation and terms and conditions of work with each bargaining
unit, the City’s goal is to work collaboratively with all employees and labor to solve
problems and develop creative solutions to meet bargaining objectives. Goals for
bargaining units and managers have much in common and labor and management have
engaged together effectively in the past. The focus of collaboration should continue to
be on ways to contribute positively to the organization and maintain effective services
for the community. Developing and communicating Guiding Principles will inform on‐
going, meaningful dialogue between managers and bargaining units at all levels.
At the same time the City is partnering with labor in a collaborative manner, the City
must properly distribute responsibility and accountability to ensure management and
delivery of services consistent with Council and community expectations. In order to
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meet these expectations the City must maintain management rights and direct
operational decision‐making.
Analysis
A. Current challenges to City budget and rising employee costs have been and will
continue to be key issues in labor negotiations for the foreseeable future.
The City exists to provide a forum for governance and to effectively and efficiently
deliver services to the community. A substantial portion of the general fund operating
budgets for those services, approximately 66%, goes to fund salaries and benefits for
the staff necessary to deliver services. As the City heads into its fourth consecutive year
of budget shortfalls, it must continue examining the cost of employee salaries and
benefits and their impacts to the budget.
Recent negotiations with employee groups have helped to address some of the budget
shortfalls. For example, where the City once paid the entire amount of the employee
PERS contribution (in addition to the Employer contribution) and the full amount of
health care premiums, most groups now pay at least a portion of the employee PERS
contribution and up to 10% of the medical premium.
However, even with these and other cost‐saving measures, personnel costs associated
with pension, health, and retiree medical have continued to increase at rates that
exceed revenue growth. The average budgeted cost for an employee position has
increased 20% since 2009, and the benefit portion of salary and benefits has increased
approximately 12% in just the past two years. Continued increases in costs for employee
salaries and benefits are projected, driven primarily by health and pension costs.
Additionally, the valuation of the liability for post‐employment health care is growing
and has grown from $105 million to $133 million in the last 2 years. The fact that on‐
going revenues have not been able to cover expenditure growth over the past few years
and into the projected future years indicates a fundamental structural imbalance that
needs long‐term solutions to restore balance and provide a sustainable means to deliver
services to the community.
This is due to more than the recent economic crisis in the United States. Past local
government decisions in California over the past 10‐15 years granted significant benefit
increases that would not be granted today. Yet those decisions have cost implications
that will last for years many years into the future. Additionally, the local government
tax structure is increasingly disconnected from the economy itself, so that even
improvements in today’s economy do not translate into commensurate increases in
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local government revenue. In short, the slope of increase for expenses can be expected
to rise more sharply than revenues going forward, without continued expense
reductions.
Because personnel costs are such a large part of operating expenditures, and salaries
and benefits are determined through the labor negotiations process, it is important for
the City to address these issues in current and future labor negotiations. Guiding
principles for those negotiations can help the City, including managers, employees and
labor, remain mindful of the fiscal challenges and service needs of the City, align the
bargaining process with the City’s primary function of providing services to the
community, and establish transparent principles to guide the City in making decisions
about employee salaries and benefits.
B. Proposed Guiding Principles.
Based on the issues identified above, staff has identified the following key principles to
guide adoption of labor agreements and compensation plans:
1. City Services/Programs/Activities: The City’s core mission is to provide
services, programs, and activities that align with the priorities of the public
and the City Council; levels of employee compensation should support the
City’s long‐term ability to continue providing those services.
2. City Finances: The City should be able to meet the cost of any compensation
commitment from current and projected on‐going City revenues.
3. Timing of Negotiations: Protracted negotiations create uncertainty for the
City and employees; the City should endeavor to reach agreement with
recognized employee organizations on matters within the scope of
representation prior to adoption of the City’s budget for the ensuing fiscal
year.
4. Total Compensation: In making compensation decisions, the City should
consider the total costs of a position including salary, pension, healthcare and
all other benefits.
5. Recruitment & Retention: The City’s compensation should be set at levels
sufficient to attract and retain qualified employees who are committed to the
City’s goals, programs and delivery of high quality services, understanding
that those levels must be economically feasible.
2.b
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6. Transparency: The structure and components of compensation of City
employees should be easy for employees and the public to understand, and as
efficient as possible for staff to administer.
7. Management of Increasing Benefit Costs: The City should pursue short term
and long term strategies to curtail increasing employee benefit costs. It
should move away from providing benefits that place the burden on the City
to pay the cost of automatic increases and toward benefit structures that
require negotiations to determine how much and who will pay for such costs.
8. Innovation in Employment and Compensation: Providing broader and more
creative choices regarding benefits may further the concepts set forth in
Guiding Principles 1‐7. The City should consider innovative alternatives to
traditional models of public employment and public employee benefits
including, for example, hybrid pension plans, cafeteria plans, scaled
compensation in lieu of guaranteed benefits, benefit buyout options, and
similar ideas.
In addition, staff recommends that the Council consider reviewing the Principles
annually to ensure that they remain relevant and accurately convey the City’s priorities.
Policy Impacts
The Council is not required to adopt guiding principles for labor negotiations. However,
Guiding Principles can help establish a transparent policy framework to guide the City’s
labor relations and clearly communicate City priorities regarding labor issues to
employees, labor, and the community. The Principles can also assist the negotiating
team by establishing overall objectives against which it can measure specific proposals,
as well as enhance accountability by providing a more concrete way to measure or
evaluate the outcome of negotiations. The City’s bargaining team will continue to meet
and confer in good faith with flexibility to partner with labor to craft solutions to
individual unit issues that also meet the uniform policy framework provided by these
Guiding Principles.
2.b
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ATTACHMENT C
2-14-12 P&S ITEM 2 LABOR EXCERPT
P&S 1
POLICY AND SERVICES COMMITTEE
DRAFT EXCERPT
Regular Meeting
February 14, 2012
Labor Guiding Principles
Marcie Scott, Acting Assistant Human Resources Director gave a brief
presentation. The concepts being presented rose in discussion in May of 2011
with the changes to the Binding Interest Arbitration provision. The Governor
approved a new law, AB646, which implemented a fact finding process in the
impasse procedure for labor disputes. Palo Alto had decided to modify the
impasse procedures to incorporate the fact finding process. Through the course
of discussions with the labor groups it was agreed the Guiding Principles were
not in the appropriate location. Staff felt the Guiding Principles should not be
limited to impasses but could serve a broader purpose which was open for
Council discussion. The concepts in the Guiding Principles were not new to labor
discussions in Palo Alto and some had been specifically negotiated at the table.
The City currently did not have a document that described the Council’s goals
and vision on priority issues such as managing pension costs. Staff believed
there was value in having a written document expressing what the Council would
be looking for in terms of labor principles. Written principles would be a useful
communication tool for employees and for the public. Staff believed the
employee groups and the City had common interests in addressing and resolving
issues and having a written guiding policy would make the negotiations more
efficient. The City needed to maintain management rights and directed
operational decision making as the labor processes were in motion.
Council Member Espinosa asked Staff to focus on the Guiding Principles and
allow time for questions if they arose.
Ms. Scott stated there were eight Guiding Principles that should support the
City’s delivery of services to the community. The bargaining efforts should result
in efficiencies, improved services, and quality of life. Additionally; technology use
should be reviewed, approaches to working smarter, and the primary focus
should be on City services. City Finances were the second principle and Staff had
taken Council direction to locate structural long term changes in the budget
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ATTACHMENT C
2-14-12 P&S ITEM 2 LABOR EXCERPT
P&S 2
process. It was important to discuss City finances at the negotiation table and
inform the employees so there was a common understanding. The third principle
was the timing of the negotiations which was not intended as a hard and fast
timeline but a goal statement to help communicate to all parties involved to
avoid long periods of limbo. Total compensation was the fourth principle focusing
on the full cost of City benefits including base salary, City paid pension, City paid
healthcare, workers compensation costs, unemployment insurance, special pay
such as K-9 and bilingual Recommended principle number five was recruitment
and retention which was challenging because it required trade offs between the
budget status and attracting and retaining skilled personnel. Proposed principle
six was transparency which was more important now than previously determined
because of public expectations with regard to understanding public sector salary
and compensation, sharing information at the bargaining table to ensure both
sides were equally familiar, and a goal was to make compensation easily
understood for the employee and the public. Management of increasing benefits
costs was principle number seven; an example would be the 90/10 percent
medical cost sharing program so as healthcare premiums rose the employees
would be contributing different amounts while maintaining the 10 percent cost
share. The final proposed principle was innovation in employment and
compensation. The function of the principle was for the City to look for ways to
provide flexibility for employees within compensation. She noted there were
other public agencies exploring new approaches such as an incentive for
employees to opt out of their retiree medical program.
Council Member Klein had a concern with principle number three. He felt the
timing and negotiation should be a hard and fast deadline and not a goal
statement. His understanding was Staff was bringing a standardized guideline
with each contract so the City could reach the goal of having a resolution by the
budget discussion time. The past few years the goals had not been met and the
end result had been a higher cost for the City.
Ms. Scott said the challenge Staff faced was there was an obligation to meet and
confer in good faith; although, there was no clear definition on the number of
meetings or a specific amount of type of discussion. She understood the concern.
Council Member Klein said in order to make the budget deadline the schedule to
meet and confer may need to be moved back. At the present time there was no
incentive or reason for the union to live within the goals set by Staff. He had an
issue with the verbiage between should and shall; he was comfortable with
should in most cases. In principle number four he preferred “shall” since he did
not see the argument for not considering total compensation. He felt there
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ATTACHMENT C
2-14-12 P&S ITEM 2 LABOR EXCERPT
P&S 3
should be a paragraph added that reflected the idea in conducting the
negotiations, the City was respectful of the unions’ positions and their legal
rights, and the City wanted to hear their views on how to improve the
organization. He saw the aspiration of having a good ongoing relationship with
the unions as one of the Guiding Principles. He requested the equality across the
bargaining units be incorporated.
Ms. Scott noted the equality had been a driving principle but not without
challenges.
Council Member Klein said Staff recommended reviewing the Guiding Principles
on an annual basis; he was not in favor of the recommendation.
Council Member Schmid endorsed the deadline of having the agreements
needing negotiations end with appropriate time to have resolved for the budget
cycle. Under total compensation he felt it was important to make a distinction
between the current obligations and an honest assessment of future obligations.
With regard to recruitment and retention; Staff had a remarkable number of the
eligible retirement populations, he suggested verbiage be added to note hiring
and training employees to fill the positions rather than merely filling the
retirement gaps. He felt strongly about identifying Governor Brown’s proposed
Pension and Benefits Reform Plan into principles seven and eight.
Council Member Espinosa had concern with the lack of a timeline for principle
three since the matter had been discussed in previous conversations and was an
important element. In order to have a goal it was a necessity to have a specific
start time, milestones that needed to be reached by a certain point so when the
budget time was reached the resolution was accomplished. He stated he wanted
verbiage of mutual respect incorporated.
Ms. Scott said Staff could take the concept of building and maintaining a
relationship with labor and incorporate it into the Guiding Principles. She
confirmed the verbiage with respect to the timeline was a critical piece and the
language could be stronger, acknowledging the obligation to meet and confer
and yet incorporating a strong statement of the intended accomplishment.
Council Member Espinosa understood there were parameters out of the City’s
control; he merely was surprised to not see the information included after the
discussions.
Council Member Klein reiterated his concern was not to have the deadlines met
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City of Palo Alto (ID # 2550)
Policy and Services Committee Staff Report
Report Type:Meeting Date: 2/14/2012
February 14, 2012 Page 1 of 6
(ID # 2550)
Summary Title: Labor Guiding Principles
Title: Recommendation Regarding Approval of Labor Guiding Principles
From:City Manager
Lead Department: Human Resources
Recommendation
Staff recommends that the Policy & Services Committee review and recommend
that the Council approve guiding principles for labor negotiations.
Background
The concept of guiding principles for labor negotiations arose in Palo Alto in late
2011 when the City amended its local impasse resolution rules to address the
new Meyers-Milias Brown Act rule which allows employee organizations to
request nonbinding fact-finding after impasse is declared and before a local
agency may implement the terms of its last, best and final offer. Staff originally
proposed including decision “factors” describing key considerations for labor
negotiations that the fact-finder would be required to consider in making
recommendations. However, in refining those factors and discussing the issue
with labor, staff ultimately determined that such considerations are not and
should not be limited to impasse resolution. More importantly, approval of stand-
alone guiding principles gives the Council and the public the opportunity to have
a broader discussion about main values that it wants to guide the City’s approach
to labor issues.
February 14, 2012 Page 2 of 6
(ID # 2550)
Discussion
The City currently has 7 recognized bargaining units and one unrepresented
group of managers and professionals. While the City is required to engage in the
bargaining process to set compensation and terms and conditions of work with
each bargaining unit, the City’s goal is to work collaboratively with all employees
and labor to solve problems and develop creative solutions to meet bargaining
objectives. Goals for bargaining units and managers have much in common and
labor and management have engaged together effectively in the past. The focus
of collaboration should continue to be on ways to contribute positively to the
organization and maintain effective services for the community. Developing and
communicating Guiding Principles will inform on-going, meaningful dialogue
between managers and bargaining units at all levels.
At the same time the City is partnering with labor in a collaborative manner, the
City must properly distribute responsibility and accountability to ensure
management and delivery of services consistent with Council and community
expectations. In order to meet these expectations the City must maintain
management rights and direct operational decision-making.
Analysis
A.Current challenges to City budget and rising employee costs have been and
will continue to be key issues in labor negotiations for the foreseeable future.
The City exists to provide a forum for governance and to effectively and efficiently
deliver services to the community. A substantial portion of the general fund
operating budgets for those services, approximately 66%, goes to fund salaries
and benefits for the staff necessary to deliver services. As the City heads into its
fourth consecutive year of budget shortfalls, it must continue examining the cost
of employee salaries and benefits and their impacts to the budget.
February 14, 2012 Page 3 of 6
(ID # 2550)
Recent negotiations with employee groups have helped to address some of the
budget shortfalls. For example, where the City once paid the entire amount of the
employee PERS contribution (in addition to the Employer contribution) and the
full amount of health care premiums, most groups now pay at least a portion of
the employee PERS contribution and up to 10% of the medical premium.
However, even with these and other cost-saving measures, personnel costs
associated with pension, health, and retiree medical have continued to increase at
rates that exceed revenue growth. The average budgeted cost for an employee
position has increased 20% since 2009, and the benefit portion of salary and
benefits has increased approximately 12% in just the past two years. Continued
increases in costs for employee salaries and benefits are projected, driven
primarily by health and pension costs. Additionally, the valuation of the liability
for post-employment health care is growing and has grown from $105 million to
$133 million in the last 2 years. The fact that on-going revenues have not been
able to cover expenditure growth over the past few years and into the projected
future years indicates a fundamental structural imbalance that needs long-term
solutions to restore balance and provide a sustainable means to deliver services to
the community.
This is due to more than the recent economic crisis in the United States. Past
local government decisions in California over the past 10-15 years granted
significant benefit increases that would not be granted today. Yet those decisions
have cost implications that will last for years many years into the future.
Additionally, the local government tax structure is increasingly disconnected from
the economy itself, so that even improvements in today’s economy do not
translate into commensurate increases in local government revenue. In short, the
slope of increase for expenses can be expected to rise more sharply than revenues
going forward, without continued expense reductions.
Because personnel costs are such a large part of operating expenditures, and
salaries and benefits are determined through the labor negotiations process, it is
February 14, 2012 Page 4 of 6
(ID # 2550)
important for the City to address these issues in current and future labor
negotiations. Guiding principles for those negotiations can help the City, including
managers, employees and labor, remain mindful of the fiscal challenges and
service needs of the City, align the bargaining process with the City’s primary
function of providing services to the community, and establish transparent
principles to guide the City in making decisions about employee salaries and
benefits.
B.Proposed Guiding Principles.
Based on the issues identified above, staff has identified the following key
principles to guide adoption of labor agreements and compensation plans:
1.City Services/Programs/Activities: The City’s core mission is to provide
services, programs, and activities that align with the priorities of the
public and the City Council; levels of employee compensation should
support the City’s long-term ability to continue providing those services.
2.City Finances: The City should be able to meet the cost of any
compensation commitment from current and projected on-going City
revenues.
3.Timing of Negotiations: Protracted negotiations create uncertainty for
the City and employees; the City should endeavor to reach agreement
with recognized employee organizations on matters within the scope of
representation prior to adoption of the City’s budget for the ensuing
fiscal year.
4.Total Compensation: In making compensation decisions, the City should
consider the total costs of a position including salary, pension,
healthcare and all other benefits.
February 14, 2012 Page 5 of 6
(ID # 2550)
5.Recruitment & Retention: The City’s compensation should be set at
levels sufficient to attract and retain qualified employees who are
committed to the City’s goals, programs and delivery of high quality
services, understanding that those levels must be economically feasible.
6.Transparency: The structure and components of compensation of City
employees should be easy for employees and the public to understand,
and as efficient as possible for staff to administer.
7.Management of Increasing Benefit Costs: The City should pursue short
term and long term strategies to curtail increasing employee benefit
costs. It should move away from providing benefits that place the
burden on the City to pay the cost of automatic increases and toward
benefit structures that require negotiations to determine how much and
who will pay for such costs.
8.Innovation in Employment and Compensation:Providing broader and
more creative choices regarding benefits may further the concepts set
forth in Guiding Principles 1-7. The City should consider innovative
alternatives to traditional models of public employment and public
employee benefits including, for example, hybrid pension plans,
cafeteria plans, scaled compensation in lieu of guaranteed benefits,
benefit buyout options, and similar ideas.
In addition, staff recommends that the Council consider reviewing the Principles
annually to ensure that they remain relevant and accurately convey the City’s
priorities.
Policy Impacts
The Council is not required to adopt guiding principles for labor negotiations.
However, Guiding Principles can help establish a transparent policy framework to
guide the City’s labor relations and clearly communicate City priorities regarding
February 14, 2012 Page 6 of 6
(ID # 2550)
labor issues to employees, labor, and the community. The Principles can also
assist the negotiating team by establishing overall objectives against which it can
measure specific proposals, as well as enhance accountability by providing a more
concrete way to measure or evaluate the outcome of negotiations. The City’s
bargaining team will continue to meet and confer in good faith with flexibility to
partner with labor to craft solutions to individual unit issues that also meet the
uniform policy framework provided by these Guiding Principles.
Prepared By:Elizabeth Egli, Administrative Assistant
Department Head:Sandra Blanch, Interim Director, Human Resources
Department
City Manager Approval: ____________________________________
James Keene, City Manager