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100906 CC WS AgP CITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, OCTOBER 9, 2006 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 8:00 P.M. or Immediately Following the Regular Council meeting AGENDA 1. CONVENE CITY COUNCIL WORK SESSION A. Roll Call Mayor Love _ Lizee Turgeon _ Callies Wellens B. Review Agenda 2. EMPLOYEE HANDBOOK POLICIES (Att. - Administrator's memorandum) A. Sick Leave / Severance Policy B. Funeral Leave Policy C. Health Insurance Opt-Out Policy 3. VOLUNTEER LEAVE POLICY (Att. - Administrator's memorandum) 4. OTHER 5. ADJOURN CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD. SHOREWOOD, MINNESOTA 55331-8927 . (952) 474-3236 FAX (952) 474-0128' www.ci.shorewood.mn.us . cityhall@ci.shorewood.mn.us Celebrating 50 Years · 1956 - 2006 MEMORANDUM City Council Craig W. Dawson, City Administrator I' 1\ October 5, 2006 lLlJ City Council Work Session Items 2a) Sick Leave/Severance Policy 2b) Funeral Leave Policy 2c) Health Insurance Opt-Out Policy TO: FROM: DATE: SUBJECT: These three items are the only ones that need to be resolved for placement in the new employee handbook. Council should discuss and provide direction so that approval of the new employee handbook can be considered as early as October 23. 2a) Sick Leave/Severance The goal of changes to the sick leave/severance policies has been to establish a cap to limit the City's financial liability on the balance of sick leave paid as severance at time of an employee's termination. At the September 25 work session, Council asked that the employee Benefits Committee review and provide comments on a plan that would: 1) Place a 960-hour cap for purposes of calculating severance 2) Have a graduated scale for severance based on tenure with the City; e.g., 5 - 9 years 30% 10 - 14 years 35% 15 - 19 years 40% 20 - 24 years 45% 25 + years 50% 3) Have no cap on the number of hours that may accumulate in an employee's sick leave balance. Their large balances would remain and could grow to assure full wages if they were ill or injured for a long, long time. Three employees currently have more than 960 hours in their sick leave balance. Each has approximately 1600 hours on balance. For comparisons of the current and this proposed plan, Current: @ 1600 hours one-third of the amount over 400 hours = (1/3 x 1200 hours) = 400 hours paid out as severance ~. '..J PRINTED ON RECYCLED PAPER Remaining Benefit/Handbook Items October 9, 2006, City Council Work Session Page 2 As proposed above: w/ 15 years of service w/ 20 years of service w/ 25 years of service 960 hours x 40% 384 hours 960 hours x 45% = 432 hours 960 hours x 50% = 480 hours For the two employees having between 15 and 20 years of service, the severance is generally equivalent under the two plans. For the employee with more than 20 years of service, the proposed severance is greater than the current plan. (These equivalencies are based on these employees' current balances, not what they might have been able to accumulate by the time they leave employment with the City.) This week, the Benefits Committee reviewed this latest plan. Committee members believed that the"800-hour" proposal was fair for both the City and the employees, and expressed the high value they place on the proposed program that rewarded employees for responsible use of sick leave. They also expressed the importance that the three employees affected by the cap be addressed fairly regarding conversion to capped amounts of leave or severance, as their planning and expectations have been based on the current policy. The narrative pages from the memorandum for the September 25 work session are attached. They relate alternatives to address the situations of the three employees who would be affected by the "800-hour" proposal. 2b) Funeral Leave As Council reviewed the proposed new handbook in June, questions were raised about one provision in Sec. 8.10, Funeral Leave: "Upon notice to the immediate supervisor, one (1) day of leave shall be granted for death or funerals of other relatives or friends." This language appears verbatim in the City's labor agreement with AFSCME (public works). The City's current policy provides that "[o]ther time off with pay may be granted at the discretion of the City Administrator." While it is preferable to have the same policy for all employees, the Council may wish to retain the current policy. 2c) Health Insurance Opt-Out Policy For many years (no one can seem to remember or find a date of action), the City has been willing to pay $50/month to any employee who chose not to participate in the City's health insurance plan. The benefit to the City is not having to pay the single-coverage premium (at several hundred dollars per month, depending on one's age) if the employee did choose to have coverage through the City. The opt-out payment could be used by the employee to pay toward the dependent premium of a spouse's health insurance plan, or toward private insurance the employee might have. The proposal to raise the monthly payment to $100 was to acknowledge inflation over more than a decade. Currently, one employee is receiving the opt-out payment. CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD. SHOREWOOD, MINNESOTA 55331-8927. (952) 474-3236 FAX (952) 474-0128. www.ci.shorewood.mn.us . cityhall@ci.shorewood.mn.us Celebrating 50 Years · 1956 - 2006 MEMORANDUM TO: City Council FROM: Craig W. Dawson, City Administrator011'i. - I J Bonnie Burton, Director of Finance ~ DATE: September 21,2006 SUBJECT: Changes to Sick Leave and Severance Benefits (Work Session Item) Background Full-time City employees accrue eight hours of sick leave per month. The proposed Employee Handbook will allow regular part-time employees to accrue sick leave on a pro-rated basis. Currently, there is no limit on the number of hours of sick leave an employee may accumulate over the course of his/her employment with the City. When employees terminate their employment, they are paid a portion of their sick leave balance, as is common in local government. This is referred to as a severance benefit and it is common in local government. In Shorewood, employees receive cash for one-third of the number of sick leave hours they have accrued in excess of 400 when they leave employment. Discussion Prudent financial management suggests the City should seek to cap its liabilities. It was with this in mind that the employee Benefits Committee considered several alternatives that would be fair to both employees and the employer. The key objectives in the plan design are: . Provide motivation to use sick leave appropriately . Simplicity, for ease of understanding and administration . Use as an incentive for employee retention Q',?, ~ ~ PRiNTED ON RECYCLED PAPER 0<;1 ~ r j(~~ Page 2 The key elelnents in the plan design are: . An 800-hour cap on the year-end sick leave balance. (In practice, employees would continue to accrue sick leave. Any balance above 800 hours at year-end would be convelted at a 50% rate to payment into defelTed compensation and/or grant of personal leave. Allowing continued accrual throughout the year, with a year-end 'look-back and adjustment' to 800 hours, does not invite abuse of sick leave.) . At termination of employment, employees would be paid 50% of the balance of their sick leave hours after five years of service. (This level of severance and qualifying period rewards appropriate use of sick leave and encourages several years of service. FUlther, this benefit is more achievable and meaningful than the City's current program.) Implementation Issues There are three employees who cUlTently are above the 800-hour cap. There are legal concems, financial impacts, and perceived faimess issues with how to best 'buy-down' or reduce their hours to the capped amount. Legal Issues The Council has asked what legal issues may exist in regard to reducing their sick leave balances to the proposed cap. The CUlTent and proposed employee handbooks specifically reserve the light of the City Council to amend any personnel policies, and as such, there is not a contract in place between the City and non-union employees regarding these benefits. Based on conversations with the City Attorney's Office and the League of Minnesota Cities, it seems there is a wide range of latitude in how to address staff who would be subject to reduction of their sick leave balance and potential severance benefit. Financial Impact One set of alternatives proposed includes a buy-down of their severance benefits to the 80Q-hour cap: a. A 100% buy-out, which the employee has relied on as future benefit, if needed. The cost of this approach is $71,265, as of 8/31/2006. b. A 50% buy-out, which is the value under the proposed sick leave/severance conversion plan. The cost of this approach is $35,633, as of 8/31/2006. c. A 33% buy-out, which is what the CUlTent value would be if they telminated today. The cost of this approach is $23,518, as of 8/31/2006. Other alternatives are possible, but more complex and difficult to understand and administer: d. Cap the number of sick leave hours at 800, and apply the severance benefit to that number. Employees would no longer accrue sick leave, and would continue to Llse their existing accrued hours until they fall below 800. (With 800 hours as the cap for accrual and payment, at time of separation the employee should be paid the greater amount of comparing the pre-cap benefit (one-third of the hours in excess of 400) and the post-cap benefit (one-half of the hours up to 800). Page 3 e. Take a year-end snapshot at 800 hours. The amount in excess of 800 would be placed in a sick leave bank to be used for time off only. Sick leave hours would continue to accrue and the employee would be eligible for the 50% conversion of hours in excess of 800 at the next year-end snapshot to defened comp or personal leave. (With 800 hours as the cap for payment only, compare the pre-cap hours and benefit (one-third of the hOllrs in excess of 400) with the post-cap severance amount (one-half ofal! hours up to 800), and pay the employee the greater amount.) Fairness Issues Either of altematives (d) or (e), may encourage inappropliate use of sick leave, in addition to being difficult and complex to administer. However, the City would not be removing any sick leave that these employees have accrued. It would appear preferable to establish a single, consistent plan, and determine the appropriate rate at which to compensate the benefit of the three employees who are above the 800-hour cap. For good employee relations, the City needs to be fair and respectful toward those affected by changes. Some Alternatives At the August 7 work session, the Council requested several altematives for the cap and severance schedule. 1. One example of a severance schedule comes from the SLMPD labor agreement. Levels of severance for police officers are based on tenure: 0- 9 years; 10-19 years; and 20+ years. Using this as a guide, the following table might be used: Service 5- 9 years 10-19 years 20+ years Severance 30% 40% 50% Max Hours 480 @ 5yrs; 800 in yr8 800 800 Max Severance 144 - 240 hrs (18 - 30 days) 320 hours (40 days) 400 hours (50 days) / The Council was also interested in the financial impact of a lower hourly caps and various percentage pay-outs: Max Hours Percent Buy-down No. of Employees Cost 400 h rs 100% 9 $139,822 400 hrs 50% 9 69,911 400 hrs 33% 9 46,142 600 hrs 100% 5 $ 97,281 600 hrs 50% 5 48,641 600 hrs 33% 5 32,103 800 hrs 100% ,.., $ 71,265 .) 800 hrs 50% ,.., 35,633 -, 800 hrs 33% ,.., 23,518 -' Please contact staff should you have questions plior to the work-session on sick-leave. CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD. SHOREWOOD, MINNESOTA 55331-8927. (952) 474-3236 FAX (952) 474-0128' www.ci.shorewood.mn.us . cityhall@ci.shorewood.mn.us Celebrating 50 Years. 1956 - 2006 MEMORANDUM TO: City Council DATE: Craig W. Dawson, City Administrator (Jb October 5, 2006 FROM: SUBJECT: V olunteer Leave Policy At an August work session the City Council reviewed employee benefits. One of the ideas that came up in discussion was a "volunteer leave" program. The Council requested research and alternatives to consider a program, and decided to address it separately so as not to cause further delay in modifications to employee benefits and approval of the new employee handbook. V olunteer Leave Concept: Several private organizations will grant leave to their employees to perform volunteer work. There are several reasons to encourage volunteer work: It provides variety in the work and perspectives of employees, it connects the organization to the community, it builds good will for the organization, and for private employers there may be tax benefits for contributing the value of their employees' time. No Apparent Legal Prohibitions for a City: In response to my inquiry, the League of Minnesota Cities noted that cities are prohibited from making financial contributions to certain types of organizations. It should be permissible, however, to grant employees. additional days off - a form of "earned compensation" - to donate their time to activities that meet a certain set of criteria. The Council should articulate how volunteer leave benefits the City, and set the criteria (rather than specifying organizations) qualifying for such leave. The League recommends review by the city attorney prior to implementation. What Are Other Cities Doing?: In a listserv survey, no responding cities indicated they had a volunteer leave program, although several were interested in the concept. Some have a type of volunteer leave where employees have been allowed to help after natural disasters, but this is more akin to mutual assistance where employees have specific skills or qualifications to be allowed to participate. ~. " . PRINTED ON RECYCLED PAPER ... V olunteer Leave Policy October 9,2006, City council Work Session Page 2 A First Try at Statement of Purpose: As this is breaking new ground, the following is a first attempt to articulate the purpose of a volunteer leave program. The City of Shorewood supports opportunities for its employees to volunteer in the community, in addition to the public service they perform as employees of the City. These activities provide opportunities for employees to strengthen the relationships between civic organizations and the City. It also provides them with a chance to become more well-rounded employees, by giving them more varied experiences and perspectives as they relate to the public interpersonally, and with fellow employees in the process of designing City programs. The City, its employees, and community organizations benefit by City employees participating in volunteer work. These City of Shorewood establishes Volunteer Leave for employees to take paid leave of absence to do volunteer work for eligible activities as set by the City. An employee may be granted up to _ hours of volunteer leave each calendar year. And a First Try at Eligible Activities: As the League advises, the City should not identify particular organizations that qualify for employees to volunteer for. Rather, the City should characterize the types of activities that would qualify as volunteer work. At the outset, though, the policy should state that for purposes of volunteer leave, employees must receive no compensation for their services. Leave would be granted only during the employee's regular working hours. Eligible Activities Community and Public Health (e.g., immunizations, blood drives, health awareness [general health or specific diseases], hospital/clinic assistance) Education (e.g., literacy, tutoring, language, classroom assistance) Environment (e.g., environmental improvement/restoration) First Aid, Natural Disasters (e.g., emergency response, emergency preparations/logistics) Food (e.g., food/meal preparation or delivery; food shelves) Public Safety (e.g., abuse prevention) Shelter (e.g., homeless, special/protected populations; construction of shelter) There could also be a geographic component to eligibility - perhaps to the cities along Lake Minnetonka and to an employee's city of residence (and its adjoining cities). What's above is an effort to start putting some structure to the concept of volunteer leave. If Council wishes to proceed further with this concept, additional Council discussion will help immensely in developing a well-rounded, inclusive, and flexible policy.