REPORT TO SHASTA COUNTY BOARD OF SUPERVISORS

BOARD MEETING DATE:  December  5, 2017
CATEGORY:  Consent - General Government-10.

SUBJECT:

Approval of Resolutions Amending Leave Cashout Provisions in Memorandums of Understanding and Shasta County Personnel Rules

Supervisorial District No. :  ALL

DEPARTMENT CONTACT:  Angela Davis, Director of Support Services, 225-5515

STAFF REPORT APPROVED BY:  Angela Davis, Director of Support Services

RECOMMENDATION

Adopt resolutions which formally amends: (1) Leave cash out procedures of the Shasta County Personnel Rules Chapters 10, 12, and 15 and; (2) the Memorandums of Understanding (MOUs) with the Deputy Sheriffs’ Association Deputy Sheriffs, Sergeant, and District Attorney Investigator (DSA-DSS/DAI) Unit, Deputy Sheriffs Association-Correctional Officers (DSA-CO), Mid-Management Bargaining Unit (MMBU), Professional Peace Officers Association (PPOA), Shasta County Employees Association- Supervisory Unit (SCEA), Sheriff’s Administrative Association (SAA), Teamsters (Trades and Crafts Unit), United Public Employees of California (UPEC)- General Unit, and UPEC- Professional Unit.

SUMMARY

The County has MOUs which include leave cashout provisions with all of the employee bargaining units, including DSA-DSS/DAI, DSA-CO, MMBU, PPOA, SCEA, SAA, Teamsters, UPEC-General, and UPEC-Professional.  Also included in this proposed action are updates to the leave cashout provisions in the Shasta County Personnel Rules, affecting Unrepresented Confidential and Unrepresented Management employees. 

DISCUSSION

The Internal Revenue Service (IRS) has determined as a general rule that compensation is to be included in an employee’s gross income in the year it is received, whether actually received in the form of biweekly or supplemental wages or constructively received in the form of hours earned and accrued that can be cashed out in a year (whether an employee opts to do such a cashout or not). However, income is not considered constructively received if the employee’s control of receipt is subject to substantial limitations or restrictions. The current leave cashout provisions give employees the option to redeem and/or cash-out specified amounts of accrued leave subject to certain conditions during times of the year; however, the procedures do not contain “substantial limitations and restrictions” under the IRS regulations, placing the County and employees at risk as the Auditor-Controller is legally obligated to report as taxable income all income that employees are eligible to receive for cash in exchange for accrued vacation, annual or leave hours under the current, unmodified plans.

To avoid risk associated with the constructive receipt issue, the Department of Support Services, in conjunction with the Auditor-Controller, is proposing to modify the current leave cashout program to be modeled after plans approved by the IRS (in IRS Private Letter Ruling 200202027). The modifications include two key limitations on the option to cash-out leave: 1) the employee must make an irrevocable election to cash-out leave in the calendar year preceding the year in which leave is cashed out, and 2) only leave accrued during the year in which leave is cashed out may be cashed out, providing it is cashed out in five (5) hour increments.

The amount of leave eligible to be cashed out remains unchanged.

Additionally, the modifications eliminate the requirement that an employee use a specified amount of leave before being eligible to elect the cashout as well as any restrictions requiring approval or limiting the times during the year leave is eligible to be cashed out.

ALTERNATIVES

The Board may choose to not approve the recommendation or make modifications in whole or in a part to the resolutions.  This is not recommended as the Auditor-Controller is legally obligated to report as taxable income all income that employees are eligible to receive for cash in exchange for accrued vacation, annual or leave hours under the current, unmodified plans (regardless of whether or not it is cashed out). Failure to modify the current leave cashout procedures places the County and its employees at risk.

OTHER AGENCY INVOLVEMENT

The County Labor Relations Negotiator, Auditor’s Office and affected bargaining units have reviewed and concur with the recommendation. The resolutions have been prepared by the Department of Support Services.

FINANCING

There is a potential financial impact for Fiscal Year 2017-2018 dependent on employees' election and request. For future fiscal years, departments will budget accordingly.

cc:  Larry Lees, County Executive Officer          

       Terri Howat, County Chief Financial Officer         

       Laura Sumner, Administrative Analyst I          

       Brian Muir, Auditor-Controller         

       Sherri Jenkins, Managing Accountant – Auditor         

       Shelley Forbes, Asst. Director of Support Services         

       Melissa Merritt, Agency Staff Serv. Analyst II- Conf.                     

       Kari Hallstrom, Agency Staff Serv. Analyst II- Conf.         

       Gage Dungy, LCW Chief Labor Negotiator         

       Dave Hawley, Teamsters         

       Lieutenant Tom Campbell, SAA         

       Michael Conti, MMBU         

      Jerry Camous, PPOA          

      Chris Darker, UPEC – Business Manager          

      Steve Allen, DSA-DSS/DAI; DSA-CO; SCEA; UPEC

      Ron Copeland, UPEC