Loading...
HomeMy WebLinkAbout07 Ord. 1372 Vacation BuybackSTAFF REPORT CITY OF PALM DESERT FINANCE DEPARTMENT MEETING DATE: November 18, 2021 — 1st Reading December 16, 2021 — 2nd Reading PREPARED BY: Janet M. Moore, Director of Finance REQUEST: Recommendation Adopt Ordinance No. 1372 amending section 2.52.705(F), "Accrued Vacation Time Buy -Back", of the Palm Desert Municipal Code to include a requirement that employees make an irrevocable election if they wish to buy back up to eighty (80) hours of their vacation time per calendar year, prior to accrual; and amending section 2.52.305(F), "Probationary Employees" to allow probationary employees use of accrued leave while on probationary status. That the City Council waive further reading and pass to second reading Ordinance No. 1372 amending section 2.52.705(F), "Accrued Vacation Time Buy -Back", of the Palm Desert Municipal Code to include a requirement that employees make an irrevocable election if they wish to buy back up to eighty (80) hours of vacation time per calendar year, prior to accrual and further amending section 2.52.305(F), "Probationary Employees" to allow probationary employees to use accrued leave while on probationary status. Executive Summary Section 2.52.705(F) of the Palm Desert Municipal Code currently allows City employees to buy back up to forty (40) hours of accrued vacation leave once per calendar year for monetary compensation under certain circumstances. In order to ensure that this practice does not cause all employees that are eligible to be taxed on a "constructive receipt" basis, the Internal Revenue Service requires that substantial restrictions or limitations be placed upon employees' ability to request a buy-back. The proposed amendment includes these restrictions and/or limitations. This is a Meet and Confer item and the City has met and conferred in good faith with the Palm Desert Employees Organization (PDEO) in accordance with the Meyers-Milias-Brown Act and the City's Employer -Employee Relations Ordinance. Section 2.52.305(F) of the Palm Desert Municipal Code defines probationary employees as those employees who are newly hired and subject to six-month probationary period. Currently, probationary employees are eligible to be paid for recognized holidays and they accrue vacation, sick, and floating holiday benefits but are ineligible to use those benefits until they complete their probationary period. Absences during the probationary period are unpaid. The proposed amendment removes this restriction. Background Information Section 2.52.705(F) of the Palm Desert Municipal Code ("PDMC") permits regular full- and half- time City employees with one hundred and twenty (120) hours of accrued vacation time to request monetary compensation for up to a maximum of forty (40) hours of their accrued vacation time per calendar year. Aside from this provision, City employees are not allowed to cash out their accrued vacation hours except at separation from employment. If employees have an unrestricted or unlimited option to cash out any portion of their already accrued vacation hours prior to separation from employment, then the Internal Revenue Service November 18, 2021 — Staff Report Adoption of Ordinance No. 1372 on Buy -Back of Accrued Vacation Time and Probationary Employees Access to Paid Leave Page 2 of 2 ("IRS") may regard the portion eligible for buy-back as constructively received income and a taxable event,. If employees are instead required to make an irrevocable election to buy back vacation hours in the preceding calendar year prior to accrual ("Election Year"), and to earn, request, and receive payment for the hours in the year of accrual ("Payout Year"), then the IRS will not regard this as a constructive receipt of income since the employees made the election before they accrued the vacation hours. While the PDMC currently limits the amount of a buy-back, it does not require that an election be made prior to the accrual of vacation hours. The proposed revisions to PDMC section 2.52.705(F), detailed in Exhibit "A", would allow an increase in the number of hours of accrued vacation time that employees can buy back each calendar year, and place the following "substantial restrictions or limitations" upon their ability to cash them out: 1. In the preceding calendar year ("Election Year"), employees must make an irrevocable election to buy back their vacation hours that will accrue in the next calendar year ("Payout Year"), up to the maximum number of hours that City policy allows. 2. During the Payout Year, employees must submit a written request for a buy-back. 3. If an employee makes an irrevocable election but fails to submit a written request for payment by December 1 of the Payout Year, then the City will process the buy-back request and pay the employees prior to December 31 of the Payout Year. 4. If an employee terminates prior to requesting a buy-back in the Payout Year, the employee will be paid for accrued vacation at termination the same as if they had not made an election in the "Election Year'. The current condition for a minimum number of hours (120) would be modified as part of the irrevocable requirement as follows: Employees with at least eighty (80) hours of accrued vacation leave on December 1 may buy back up to forty (40) hours of future accrued vacation leave and employees with at least one hundred and twenty (120) hours may buy back up to eighty (80) hours of future accrued vacation leave. If the City does not adopt these changes, including the restrictions and limitations, then employees may be taxed on the cash value of the current allowed amount of forty (40) accrued vacation hours that are subject to buy-back each calendar year, even if they have not used them or cashed them out. Since June 1, 2021, the City has hired 15 new employees and continues to recruit for vacant positions. The current restriction on the use of accrued leave in section 2.52.305(F) of the Palm Desert Municipal Code inhibits recruitment and restricts the development of a positive organizational culture. Further, with the expiration of the Families First Coronavirus Response Act (FFCRA) leave provisions on December 31, 2020 and the COVID-19 supplemental paid sick leave under SB 95 on September 30, 2021, there is no provision by which a probationary Section 451-2(a) of Title 26 Code of Federal Regulations Part 1 defines "constructive receipt of income" as income, not received in cash, that a taxpayer has constructively received in the tax year that it is: (1) credited to their account; (2) set apart for them; (3) made available so that it may be drawn upon at any time; or (4) could have been drawn upon if a notice of intention to withdraw had been given. Income is not constructively received, however, if substantial restrictions or limitations are placed upon the taxpayer's control of its receipt. November 18, 2021 — Staff Report Adoption of Ordinance No. 1372 on Buy -Back of Accrued Vacation Time and Probationary Employees Access to Paid Leave Page 2 of 2 employee can receive paid leave if they are required to quarantine due to a COVID-19 exposure and/or contract COVID-19. The proposed amendment removes this restriction and provides probationary employees access to paid leave through the accruals they are otherwise earning. Fiscal Analysis The City has reserved the value of compensated balances in a separate fund. By increasing the amount of vacation time that employees can cash -out during a year and decreasing the threshold of accrued vacation leave to be eligible, the City's accrued liabilities for compensated leaves, at the end of each fiscal year, may be lower. This may also lower the City's cost of payouts when an employee leaves the City. There is no fiscal impact on the use of paid leave by probationary employees as it is limited to the use of a benefit they are already earning and does not create a new leave accrual. LEGAL REVIEW RWH Robert W. Hargreaves City Attorney DEPT. REVIEW Yawn?'%?. ?�1oo2Pi FINANCIAL REVIEW 741, 711oo2e Janet M. Moore Janet M. Moore Director of Finance Director of Finance City Manager, L. Todd Hileman: L. Todd flitevu.anA, ATTACHMENTS: 1. Exhibit "A" -- Amendments to PDMC section 2.52.705(F) 2. Exhibit "B" -- Ordinance No. 1372 CITY COUNCIL4CTION APPROVED �°// DENIED RECEIVED OTHER Nop+ ord. No. 1312 MEETING DATE i 2• k19. OA AVFS• Torietfhan,e)elly,Nes--tztnde, ©itirt-ens!/cr�,rLfl�(►miK NOES: NP' e• ABSENT: NOV1P ABSTAIN: N Vne VERIFIED BY• NJ 1 Si''S Original on File with City Clerk's Office ASST. CITY MGR. .Andy Firestine Andy Firestine Assistant City Manager EXHIBIT "A" PROPOSED AMENDMENTS TO PALM DESERT MUNICIPAL CODE SECTION 2.52.705(F) 2.52.705 Vacation leave. As currently written: F. Accrued Vacation Time Buy -Back. All regular full and half-time employees with one hundred twenty accrued vacation hours, may, upon written request, be compensated for up to a maximum of forty hours of accrued vacation per calendar year, instead of taking vacation time off. The same applies to exempt employees in Group A and Group B. Amended to read as follows: F. Accrued Vacation Time Buy -Back. All regular full- and half-time employees who are not subject to an employment contract with conflicting provisions, may make a written, irrevocable election at the end of each calendar year ("Election Year") to buy back a portion of their vacation accrued in the next calendar year ("Payout Year") for monetary compensation: 1. Employees with at least 120 hours of accrued vacation on December 1 of each year may make an irrevocable election to buy back up to 80 hours of vacation to be accrued and paid out in the next calendar year. 2. Employees with at least 80 hours of accrued vacation on December 1 of each year may make an irrevocable election to buy back up to 40 hours of vacation to be accrued and paid out in the next calendar year. In the Payout Year, employees may submit a written request to buy-back the elected hours. If an employee made an election but has failed to request payment by December 1 of the Payout Year, then the elected hours will be paid to the employee prior to December 31 of the Payout Year. EXHIBIT "B" ORDINANCE NO. 1372 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM DESERT, CALIFORNIA, AMENDING PALM DESERT MUNICIPAL CODE SECTION 2.52.705(F) "ACCRUED VACATION TIME BUY-BACK", TO INCLUDE THE REQUIREMENT OF AN IRREVOCABLE ELECTION TO BUY-BACK UP TO EIGHTY (80) HOURS OF VACATION TIME PER CALENDAR YEAR, PRIOR TO ACCRUAL AND AMENDING SECTION 2.52.305(F) "PROBATIONARY EMPLOYEES", TO ALLOW PROBATIONARY EMPLOYEES' USE OF ACCRUED LEAVE WHILE ON PROBATIONARY STATUS WHEREAS, the City of Palm Desert ("City") is amending Section 2.52.705(F) of the Palm Desert Municipal Code ("Municipal Code"), described particularly herein below; and WHEREAS, the City Council finds that the City has established a policy by which qualifying City employees are allowed to buy-back a portion of their accrued vacation time for monetary compensation; and WHEREAS, the City Council finds that it is not the intent of the policy that qualifying employees should be taxed as a constructive receipt of income; and WHEREAS, the City council finds that it is the intent of the policy to not unnecessarily complicate tax reporting or create tax penalties for the qualifying City employee and the City of Palm Desert; and WHEREAS, the City Council finds that in order to continue to recruit qualified employees, it is necessary to allow probationary employees to immediately use accrued sick, vacation, and floating holiday benefits; and WHEREAS, the City Council of the City of Palm Desert, California has determined that the amendments to Palm Desert Municipal Code sections 2.52.705(F) and 2.52. 305(F) are consistent with applicable federal and state law; and WHEREAS, all other legal prerequisites to the presentation of this Ordinance have occurred. THE CITY COUNCIL OF THE CITY OF PALM DESERT, CALIFORNIA, DOES ORDAIN AS FOLLOWS: SECTION 1. Recitals. The City Council of the City of Palm Desert, California, hereby finds that the foregoing recitals are true and correct and are incorporated herein as substantive findings of this Ordinance. SECTION 2. Current PDMC Chapter 2.52.705(F) -- "Accrued Vacation Time Buy -Back" currently reads as follows: F. Accrued Vacation Time Buy -Back. All regular full and half-time employees with one hundred twenty accrued vacation hours, may, upon written request, be compensated for up to a maximum of forty hours of accrued vacation per calendar year, instead of taking vacation time off. The same applies to exempt employees in Group A and Group B. Ordinance No. 1372 SECTION 3. Amendment to Chapter 2.52.705(F) -- "Accrued Vacation Time Buy -Back" shall be amended to read as follows: F. Accrued Vacation Time Buy -Back. All regular full- and half-time employees who are not subject to an employment contract with conflicting provisions, may make a written, irrevocable election at the end of each calendar year ("Election Year) to buy back a portion of their vacation accrued in the next calendar year ("Payout Year) for monetary compensation: 1. Employees with at least 120 hours of accrued vacation on December 1 of each year may make an irrevocable election to buy back up to 80 hours of vacation to be accrued and paid out in the next calendar year. 2. Employees with at least 80 hours of accrued vacation on December 1 of each year may make an irrevocable election to buy back up to 40 hours of vacation to be accrued and paid out in the next calendar year. In the Payout Year, employees may submit a written request to buy-back the elected hours. If an employee made an election but has failed to request payment by December 1 of the Payout Year, then the elected hours will be paid to the employee prior to December 31 of the Payout Year. SECTION 4. Amendment to Section 2.52.305(F) "Probationary Employees": shall be amended to read as follows: "F. Probationary Employees. Probationary employees are employees who are newly hired and subject to a period of six months (one thousand forty hours) probation, which is also referred to as a probationary period. The work and conduct of probationary employees will be subject to close scrutiny and evaluation. The probationary period is part of the selection process, and shall be considered to be a working test period during which an employee is required to demonstrate fitness for the appointed position by actual performance of the duties of the position. At all times during the probationary period, employment with the city is considered to be at -will and the employment relationship may be terminated at any time for any reason by either party. As such, probationary employees serve at the will of the city and are subject to termination without cause and without the right of appeal or hearing, prior to the expiration of this period. A probationary employee shall be evaluated by his or her supervisor at the end of the first three months of the probationary period. The evaluation will include a recommendation as to whether or not the employee should continue with the remaining three months of the probationary period. Prior to the end of the six-month (one thousand forty hours) probationary period, the employee's supervisor will evaluate the employee's performance. If the supervisor's evaluation indicates that the employee is performing satisfactorily after his or her six months' probationary period, or has remedied any noted performance issues, and is continuing to perform satisfactorily, the supervisor shall submit a recommendation to the 2 Ordinance No. 1372 department of human resources that the employee has successfully completed his or her probationary period and should become a regular employee. Copies of all evaluations made at any point during and at the conclusion of the probationary period shall be forwarded to the department head and the human resources department for inclusion in the employee's personnel file. Probationary employees are eligible to be paid for recognized holidays. They will also accrue sick, vacation and floating holiday benefits and :., months' worth of ccruals w:ll appointed to regular employee status. Absences during the probationary period will bo -unpaid. The probationary period is not subject to extension except when the employee is on military leave, as described herein, or on another type of approved leave in which case the city manager will approve whether or not the period may be extended for the period of such leave. Probation Period for Promoted Regular Employees. Regular employees appointed to a new position due to promotion will serve a three-month probationary period, with an interim review at six to eight weeks, unless they served in the position in an acting capacity for at least three months prior to their promotion. During this probationary period, the city has the discretion to move the employee back to his or her prior position at will and without right of appeal if it determines that it is in the best interest of the city or if it determines that the employee is unable to satisfactorily perform the new position. Transferred or promoted employees, although evaluated according to this policy, remain eligible for all benefits while demonstrating their ability to perform their new jobs." SECTION 5. Subsequent Actions by City Manager - Authorize the City Manager to do any and all things necessary to implement this Ordinance including creating and implementing policies, processes and procedures to effectuate the actions taken herewith. SECTION 6. Severability. If any section, subsection or clause of this ordinance shall be deemed to be unconstitutional or otherwise invalid, the validity of the remaining section, subsection and clauses shall not be affected thereby. SECTION 7. Effective Date. This ordinance shall become effective on the thirtieth (30th) day following its adoption. SECTION 8. Posting. The City Clerk shall certify to the passage and adoption of this ordinance and shall cause the same to be published once in a newspaper of general circulation, printed and published within the County of Riverside, and circulated within said City. 2 Ordinance No. 1372 PASSED, APPROVED, AND ADOPTED by the City Council of the City of Palm Desert, California, at its regular meeting held on the th day of , 2021, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: ATTEST: NORMA I. ALLEY, CITY CLERK CITY OF PALM DESERT, CALIFORNIA JAN C. HARNIK, MAYOR CITY OF PALM DESERT, CALIFORNIA 2