MINUTES OF THE
ASSEMBLY COMMITTEE ON WAYS AND MEANS
Sixty-seventh Session
March 15, 1993
The Assembly Committee on Ways and Means was called to order by Chairman Morse Arberry, Jr., at 8:03 a.m., on Monday, March 15, 1993, in Room 352 of the Legislative Building, Carson City, Nevada. EXHIBIT A is the Meeting Agenda. EXHIBIT B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Mr. Morse Arberry, Jr., Chairman
Mr. Larry L. Spitler, Vice Chairman
Mrs. Vonne Chowning
Mr. Joseph E. Dini, Jr.
Mrs. Jan Evans
Ms. Christina R. Giunchigliani
Mr. Dean A. Heller
Mr. David E. Humke
Mr. John W. Marvel
Mr. Richard Perkins
Mr. Robert E. Price
Ms. Sandra Tiffany
Mrs. Myrna T. Williams
COMMITTEE MEMBERS ABSENT:
None
STAFF MEMBERS PRESENT:
Mark Stevens, Fiscal Analyst
Gary Ghiggeri, Deputy Fiscal Analyst
AB201Requires periodic fundamental review of each state agency to determine whether there is justification for its existence, costs and programs.
Assemblyman Pete Ernaut testified AB201 is a good government bill. He stated in a day and age when the taxpayers are demanding a greater degree of accountability from government and more access to information about where their tax dollars are being spent, he felt the legislature has a more acute responsibility to provide better management through this type of legislation.
Mr. Ernaut explained the main thrust of AB201 is sunset auditing. More specifically, AB201 provides a vehicle by which state agencies and, in turn, agency spending is held to a greater degree of scrutiny. He noted AB201 establishes a program of fundamental budget reviews for each agency of this state once every 10 years. This program of reviews would be executed by the IFC during each interim.
Mr. Ernaut pointed out every state agency would "sunset" once every ten years. In the subsequent review, the agency would first be required to justify its existence and more clearly define its mission statement. He stated although this first step would be academic to most agencies, there have been instances in the history of this state when agencies have been perpetuated long after their need or function has diminished. Most notably, in the 1970s the Selective Service Commission was funded and operated for nearly six years after the draft had ended.
He asserted, once the agency has adequately defined its purpose and role in state government, the next step would be a thorough review of the agency budget from a base of zero thus aligning priority spending to the pertinent time period. Although Mr. Ernaut agreed the committee does an outstanding job in the biennial review of each agency budget, he recognized time constraints made it impossible to carry this in-depth of a review each session of the legislature. AB201 would merely serve as an added means of management, cost savings, and fiscal review.
Mr. Ernaut discussed the bill's sections. He explained section 1, subsection 1 establishes the IFC as the entity which would carry out the fundamental budget reviews. Subsection 2 requires the IFC to complete the list of those agencies to be reviewed during the next interim by September 15 of every odd numbered year. It also requires the IFC to complete the entire review process within 10 years. Lastly, it allows the IFC to create subcommittees, where necessary, to aid in the review that can be made up of IFC members and other legislators.
He pointed out subsection 3 delineates a list of standard criteria by which each agency will be measured in order to complete its review. Subsection 4 empowers the IFC to request all pertinent documents and reports for each state agency under review and directs those agencies to cooperate fully. Subsection 5 directs the IFC to transmit a report of each review conducted to the director of the LCB for dispersal to the entire legislature by December 20 of each even numbered year.
Mr. Ernaut explained subsection 6 provided for compensation for each member on the committee or subcommittees pursuant to NRS 218.2207, or the normal compensation for interim committees. He noted section 2 merely defines "Agency of the State". Section 3 just adds this program to the established powers of the IFC and section 4 makes the bill effective upon passage and approval.
Mr. Ernaut stressed AB201 does not in any way try to diminish or usurp the powers of the Ways and Means Committee nor the Senate Finance Committee. "It is only meant to provide another management tool by which the legislature can effectively cut the costs of government and more responsibly utilize the money entrusted to us by the taxpayers. In conclusion, AB201 affords all of us an opportunity to make a statement. That statement is we are not afraid to change, to take the bold steps necessary to recapture the trust of the Nevada taxpayer, and we are doing everything in our power to ensure their tax dollar is being managed by every responsible means available," said Mr. Ernaut.
Mr. Marvel noted this alludes somewhat to the Budget Review Process committee recommendations which included periodic review and zero based budgeting. These did not get into the final committee recommendation, but a number of the committee members still believe it would be an appropriate function of IFC to look at the agencies and to assure they are accomplishing their missions. Mr. Marvel indicated to Ms. Matteucci this bill is quite compatible with the new budget format and the reorganization. He reiterated this should be looked at very positively.
Mr. Ernaut explained the genesis of this bill results from reading the initial draft of the interim committee on reorganization which, in regard to agency spending, "agencies will go through fundamental budget review." What was left out was a definition of fundamental budget review and the possible timetable. Mr. Ernaut explained depending on these two points, the review could be ineffective. He indicated he wanted a mechanism to address both points, therefore AB201.
Mr. Ernaut elaborated there were two issues purposely left out of the bill: any schedule of when or which agencies would be reviewed and the exact methodology of sunset auditing. He emphasized the IFC has enough experience to schedule appropriately.
Ms. Giunchigliani asked if he defined fundamental review as zero based. Mr. Ernaut replied it would not be a classic zero based budget. Basically this approach would be more encompassing because it would also address the mission statement and justification of the agency as a whole. He mentioned as to the budget portion, it would be zero-based budgeting.
Ms. Giunchigliani agreed with the concept, but voiced her concern of micro-managing too much. She pointed out the budgetary process does not address various agency mission statements and how the budget relates to the agency's mission. She explained this bill does not necessarily address the issue either. Mr. Ernaut asserted this bill was not incongruous with the concept. If, in fact, the biennium review was done, an every ten year review would not be incompatible. He agreed he would like to see more of a program review also.
Mrs. Evans asked how "agency" was defined and if it would be a whole department or divisions or bureaus within a department. The definition could be critical because it could be too large to complete or too small to complete the designated agencies within the ten-year cycle. She inquired if this could be completed in conjunction with the current audit cycle in order to increase the depth and thoroughness of review. Mr. Ernaut testified he would define "agency" as the whole department, but he stated he would rather have IFC define it because they have more experience and would know how much could be completed.
Mr. Ernaut pointed out there were three philosophies to address this review: (1) utilize the audit division; (2) utilize the Ways and Means and Finance Committees; or, (3) utilize IFC. He stated he chose not utilize the Audit Division because the fiscal note would have been significantly larger than AB201 indicates. Also, in talking with the fiscal division, there was the sense the Audit Division would not be able to complete the reviews within a two-year period. Mr. Ernaut explained once the auditors are in the agencies they are beyond the jurisdiction of the legislature and legislators must wait until after the audit is completed to see the results.
Mr. Ernaut stated it could be an objective look, but the purpose of AB201 is for the legislature to have a "hands-on" experience in zero-based budgeting including subcommittees with non-money committee members participation. He remarked this would be a healthy way for non-money committee members to learn how the budgets are constructed and to work the formation process.
Mrs. Williams stressed this would be a full-time job for IFC and she did not believe they would necessarily have the expertise. She pointed out even for the fiscal division, it would be monumental. She wondered if this could even be requested of citizen legislators who cannot make a career of doing this type of function. Mr. Ernaut understood the gravity of the work load requested of IFC, but he believes it can be done even if met with reluctance.
Mr. Heller indicated no one argues with the necessity of periodic fundamental review, but he asked why the negative tone of wondering why a particular agency needs to exists. He stated the emphasis should be on policies, goals, directions and mission statements. Mr. Ernaut replied despite the negative tone, the justification to exist for most agencies is a fait accompli, but it is healthy for an agency, once every ten years, to look at why it exists. Once that question is answered, it centralizes what the agency is all about and allows the agency the ability to realign.
Mr. Ernaut testified this would work hand-in-glove with performance indicators. He understood the struggles of correct indicators and if they are adequate, but AB201 does not address the methodology.
Mr. Heller asked why IFC was chosen as the mechanism for reviewing agencies and why the formation or use of another interim committee was not addressed. He stressed IFC is already overburdened. Mr. Ernaut indicated it was just a choice and IFC is a mechanism already set up which is consistent from interim to interim.
Mr. Humke asked if Mr. Ernaut agreed with the fiscal note attached to AB201 with IFC divided into four committees, each meeting five times. This would make IFC nearly a full-time organization. He asked if this bill would flow naturally with the annual session concept. Mr. Ernaut responded the bill is modifiable with an annual session, but disagreed passing the budget review off to the staff would not be appropriate. He indicated he believes budget review would best be done by the legislature. He replied he does agree with the fiscal note which would be approximately 90 agencies per interim or $1,500 per budget which, at worst, is revenue neutral in the beginning and perhaps would bring money back into the general fund as the long-term goal.
Mr. Humke commented this would be positive, but IFC would need additional fiscal and clerical staff to accomplish this in addition to the legislators. Mr. Ernaut reiterated staff does a fantastic job and additional staff would be needed.
Chairman Arberry called for public testimony on AB201.
Mr. Howard Barrett, Research Director for the Nevada Taxpayer's Association, introduced himself. He stated the Association does support AB201 for the reasons Mr. Ernaut enumerated. He stated because of the new budget format which is a base budget there needs to be procedures whereby during the interim, the base itself is reviewed as to what is there, what reason it is there and what the expenditures are. He noted, with the reorganization, some agencies or some functions of a number of agencies will not be place appropriately and this fundamental periodic review procedure will determine if the placement was correct or if it should be moved. Mr. Barrett emphasized because each IFC member will not be able to personally analyze each detail, additional fiscal staff will be essential to review the budgets and agencies under the guidelines established by IFC and then report back to IFC.
Ms. Matteucci stated the Administration was neither for or against AB201. She indicated she was in agreement with Mr. Barrett's observation that because the new format is a base budget, review of the base on a regular basis is advised or else, over time, it would be accepted and the appropriateness not evaluated. She did not believe zero-based budgeting was the idea of the new budget format and pointed out it was not advisable to get into a true zero-based budgeting format. Ms. Matteucci stressed a periodic review of agency mission, performance indicators, purpose, and location after reorganization are entirely appropriate. She stated she was not sure what point the "sunseting" of agencies reviewed would accomplish other than the need to pass a bill to reestablish the agency. This would create an unnecessary bill to be processed. She stated this would be an additional duty for IFC, but she was not sure another committee overlooking agencies would be welcomed by the Executive Branch and pointed out as part of the reorganization some changes are recommended for IFC which would remove it from the micro-management area. She commented this may be a more appropriate role for IFC.
Ms. Matteucci stressed the fiscal note is sizable coming from the fiscal analysis division. She noted if they do have to add positions, appropriate adjustments to other budgets including adding positions in the Executive branch to work with fiscal would be necessary. She stated she would provide the worksheet for the Committee's use during final deliberations on AB201.
Chairman Arberry closed the hearing on AB201.
AB316Makes appropriation to state board of examiners for settlement of claim on behalf of certain state employees.
Ms. Matteucci testified AB316 makes an appropriation of $4.3 million dollars to accomplish three things: (1) to pay all retroactive half-time payments for plaintiffs and nonplaintiffs as a result of the settlement of the Benzler v. State of Nevada case; (2) to pay all compensatory time for the State of Nevada Employees Association members as part of the settlement; and, (3) to pay all compensatory time for those 2,600-2,700 positions which would move into the exempt merit service in the proposal. She indicated the reason these positions would be moved into salaried positions or exempt merit service is an attempt to comply with the requirements of the Fair Labor Standards Act (FLSA).
Ms. Matteucci discussed the various scenarios included in EXHIBIT D. She stated the legislation requests $1.9 million from the general fund to pay for retroactive liability (prior to the current fiscal year) for both plaintiffs and nonplaintiffs who were determined by Judge Reed to be eligible for the additional half-time, but were not paid. $707,610 is for plaintiff and SNEA liability payment for retroactive half-time and compensatory time on the books through 12/18/92.
Ms. Matteucci stated because the first payment is to be paid in April she proposed this bill be moved on through the process. If any numbers do change before payment, she indicated she would notify both money committees. She stated the final $1.6 million as included in the legislation would pay for retroactive liability of the nonplaintiffs, compensatory time liability for those positions moving into exempt merit status, and the estimated time and a half balance for FY93.
Ms. Matteucci pointed out the reason payment must be made is a result of the Board of Examiners agreement to settle the Benzler v. State of Nevada case as indicated in EXHIBIT E. She stated Mr. Jim Spencer, Deputy Attorney General, would explain the specifics of the settlement agreement included as EXHIBIT H. A copy of the District Court order is included as EXHIBIT G.
Mr. Marvel inquired if any highway monies were involved or if it would be all general fund monies. Ms. Matteucci replied AB316 only addressed general funds. She explained a number for payment of highway funds should be amended in only for the retroactive piece since anything prior to July 1992 is a stale claim. She noted that amount which should be amended into the legislation would be $398,635 which is the total highway fund amount. The exact amount for retroactive is not known currently, but the department's budgets look like they can sustain the 1992-93 payments and payouts because they were not subject to the budget cuts.
Mrs. Evans asked if state employees would prefer the choice of compensatory time versus cash payout, was it a feasible option or is the cash settlement the only option. Mr. Spencer explained SNEA had been recognized by the Ninth Circuit Court of Appeals as a bargaining agent on FLSA matters. SNEA is the only association which has this status in the state. He stated this means before any overtime is worked and can be either paid off or accrued as compensatory time, there must be an agreement in effect between SNEA and the employer.
Mr. Spencer indicated with the Benzler case, SNEA pointed out to Judge Reed that since SNEA is the authorized representative of its plaintiffs, the plaintiffs are entitled to cash payment for all overtime. Judge Reed accepted this and made the applicable ruling SNEA members were entitled to cash payment. Mr. Spencer pointed out this was reflective of a regulation in the Department of Labor which requires, as a condition of the use of comp time, there has to be a prework agreement before the employer can safely accrue comp time versus paying cash. He stated this underscores the basic principle of the FLSA which states cash is the preferred method of payment.
Mr. Spencer maintained the Attorney General's advice has been to the Executive Branch that accrued comp balances must be paid in cash and until there is an effective agreement with SNEA and the employer, which there are now several, any comp time accrued or on the books must be paid in cash. He indicated this would be the safest method to avoid any possible later litigation by disgruntled SNEA member. Mr. Spencer elaborated there could be the possibility of double liquidated damages and three years retroactive liability for failure to comply with the FLSA. He summarized SNEA asked for exactly what they received in the Benzler decision.
He commented there is a legal argument, which SNEA will address, a retroactive comp time agreement could be entered into, but the Attorney General's advice is this is not feasible. He indicated their office has given this advice to the Executive branch and noted there is a regulation stating cash payment of accrued comp time completely eliminates any liability of the employer. He pointed out the fundamental principle of the FLSA is to pay cash for overtime. Therefore, the safest way to settle the order and to prevent future liability is to pay cash for the amount of comp time accrued prior to the written agreement with SNEA and employers.
Mr. Price commented if the state tried to go on an employee-by- employee basis and ask if they would like to take comp time as opposed to full payout, with any pressure to do one or the other, it would put the state at risk for a lawsuit. Mr. Spencer agreed and stated the main idea of getting representation status, such as SNEA has, is to have the state bargain directly with the agent for terms. He indicated if an employee is not a member of a recognized organization, he would fall under individual negotiation for pre-work agreements. He reiterated employees cannot waive their rights under the FLSA without the employer being subject to some liability.
Mr. Spencer commented two years ago the state had argued on the other side of this issue, but this year, after the experience with AB576 of the Sixty-sixth session and Benzler, the Attorney General's office is taking a more conservative viewpoint. Therefore, allowing individual agreements with SNEA members could result in liability.
Mr. Price inquired if those employees who are clearly supervisory, such as division heads, are uninvolved with the Benzler decision. Mr. Glenn Rock, Director of Personnel, replied because of the way time is tracked for state employees, the only employees exempted from the Benzler decision are those who are appointed by an elected official. He pointed out, according to the Attorney General's office, some of those may not be exempted either.
Ms. Matteucci cited EXHIBIT F listing a number of Gaming Control Board employees which may be entitled to the FLSA overtime payment. She noted list 1 of EXHIBIT F is included in the amounts of EXHIBIT D. She indicated in list 2 of EXHIBIT F a number of higher level positions in the Gaming Control Board were included as entitled to time and a half, but also Gaming Control Board members and the chairman would be entitled to FLSA settlement. She explained those positions, because they serve a term, although appointed by an elected official are entitled to retroactive pay. The amounts on this list are not included in the amounts on EXHIBIT D and she recommended AB316 be increased by $339,044 to include these amounts. The payout is for time which was submitted by the employees and taken off of their payroll records before it reached central payroll, thus the inability to pick up the liability in the original estimate.
Ms. Matteucci reiterated it is the Attorney General's opinion the state is liable for the time and payment to the employees.
Chairman Arberry asked Mr. Rock on the overtime liability information, if he had accurate records reflecting all this data to assure there are no mistakes in calculations for settlement. Mr. Rock indicated Personnel had special programs run on the computer and he believed the numbers were reasonably close and accurate.
Ms. Giunchigliani stated the issue has not been resolved. She indicated two years ago AB576 of the Sixty-sixth session was voted down by four committee members who indicated it would not do what it was intended to do and now it shows that it did not. She discussed the interchanging of titles for supervisory personnel, but there is no set definition for what a supervisory employee is and should be salaried only. This definition would state who gets overtime and who does not. She asked what the status of this definition was.
Mr. Rock stated a skeleton bill from the Attorney General's office would enable legislation based on the Peat Marwick study which would result in three categories of employees: (1) politically appointed status; (2) exempt merit status; and (3) nonexempt status. He stated 140 sections of NRS need to be changed and unclassified/classified designations would be removed. Mr. Rock pointed out the positions in the exempt merit group would include supervisors, managers and those who meet the duties test. These positions cannot be defined by graded levels alone. They must fulfill a duties test requirement and it would probably be grade 37 and above.
Mr. Rock reiterated, if the legislature is interested in going ahead with the three-tier system, the department will develop the 140 sections for further consideration. He pointed out the interest of the legislature in pursuing this avenue would be the determining factor on the submission of the skeleton bill for drafting. He mentioned the passage of AB576 of the Sixty-sixth session resulted in a lawsuit and there was no doubt in his mind the state would be sued again.
Mr. Rock stated about 2,800 employees would meet the supervisory duties test. There would be other areas of law which need changing. He stated there are essentially two tests to meet and the one the state failed was the salaries basis test which is how the state requires employees to track their time, not the duties test. He stated if employees are permitted to accrue compensatory time, they are not salaried employees.
Ms. Giunchigliani voiced her concern of commingling management and support personnel. She asked to have something provided which delineates the differences. She stated if a position could hire, fire, demote, or suspend other personnel, it would be management and should not be entitled to the overtime. The point is not to circumvent Benzler. Ms. Giunchigliani asked if there would be any civil rights for exempt merit status.
Mr. Rock proposed making the delineation between exempt and nonexempt merit very clear. He suggested leaving the nonexempt status (classified) essentially unchanged, but for exempt status include due process within the departments rather than at the hearing level.
Mr. Spencer stated the Attorney General has calculated amounts two years retroactively in order to erase any liability for the time and a half issue. The conversion date from compensatory time to paying time and a half was established in December. Ms. Giunchigliani asked if non-SNEA members could still choose to receive comp time or cash. Mr. Spencer replied yes, if an agreement is reached before the work is performed. He noted some employees choose comp time versus overtime payment and SNEA members would be eligible to choose if it is a prospective, not retroactive, pre-work agreement.
Ms. Giunchigliani asked if comp time has a "use it or lose it" clause. Mr. Spencer stated they did not.
Mr. Perkins asked if the Gaming Control Board liability occurred because the board did not satisfy either of the tests. Mr. Rock replied it was because they had been keeping track of their time on time sheets and therefore were not salaried. Mr. Perkins wondered if there has been any ongoing discussion with SNEA on the establishment and definition of the three-tier classification system, especially if the Ninth Circuit Court has designated SNEA as the bargaining group. He emphasized a unilateral decision may be a violation of the FLSA also.
Mr. Rock replied they had not discussed the restructuring of classifications with SNEA and indicated if they did, it was his opinion two years from now the state would still be liable. Mr. Spencer stated the act requires once an agency or employees' association is recognized as a representative, it is only for the comp time accrual. The act does not give them any status of a recognized NLRB collective bargaining agent for all purposes such as salary or reorganization of state government. The proposal by Peat Marwick is an attempt to comply with the FLSA.
Mr. Perkins pointed out the three-tier system is driven by the Benzler decision and in that regard the discussion is over compensatory time and salary problems. He stated, in effect, the reorganization is directly affecting the compensatory time decisions which is still a FLSA argument.
Ms. Matteucci indicated the number of positions recommended to move to exempt merit has not been finalized and after they are identified, SNEA will be involved in discussions. Currently, the state is attempting to objectively define which positions should be transferred. Chairman Arberry asked when the information would be available. Mr. Rock stated the list was ready and a number of positions were discussed with the Department of Labor (Sacramento), and as a result some modifications have occurred. He agreed this was an opportunity to establish a management core for state government.
Chairman Arberry inquired when the committee will receive the exempt merit class proposal from the budget office. Ms. Matteucci indicated they would try to meet with personnel later in the week and discuss the issues and skeleton bill. Chairman Arberry asked if it had been drafted. Ms. Matteucci stated it was drafted by the Attorney General's office. Originally, it was to be included in the reorganization bill, but it was reconsidered and legislative counsel was advised and it was pulled out due to its complexity. Chairman Arberry pointed out it should be presented soon because of the inherent time restraints.
Ms. Matteucci reiterated the personnel decisions could not be punitive and had to be objective. Personnel has conducted a number of surveys to evaluate positions and this process was just completed. She stated the whole process should be completed this week and the results should be available for the committee some time the next week.
Mr. Perkins indicated his support of separating management from the other personnel, but it is should not be done unilaterally.
Mrs. Williams commented Benzler is affecting not just the state and asked what other cities and counties are doing as a result of this decision. Mr. Rock replied, in regard to the cities and counties, NRS 288 covers them for collective bargaining and all these issues have been previously bargained.
Mrs. Williams asked if it has put the state at a disadvantage because state employees did not have collective bargaining. Mr. Rock could not say the state was at a disadvantage, but because cities and counties are in collective bargaining the issues were addressed previously. Mrs. Williams asserted they were not affected by Benzler. Mr. Rock replied Kern County in the Abshire case, had been affected, but the number of cities and counties which track time similar to the state's previous system have been found guilty also and are liable for the two-year retroactive payout.
Mrs. Williams inquired if any other states have moved to the three-tier system as a result of this and what has been their experience. Mr. Rock responded there were none which he was aware of and the state has been investigating to find if any do exist. He stated Nevada is the first state to be affected at the level indicated. Mrs. Williams reiterated this is a litigious society and if the state is to avoid lawsuits, decisions should be made through discussions and cooperative agreements, not by imposing unilateral policies.
Mr. Price asked if there are any public employees, nationwide, covered by a collective bargaining agreement that Garcia or Benzler would impact. Mr. Rock replied there would be. There are a number of positions in California where the state would be vulnerable even in collective bargaining agreements which are regularly recontracted. They would be vulnerable primarily because of the way time is tracked.
Ms. Giunchigliani clarified collective bargaining does not negotiate how employees are paid, therefore employees at any level can address this as affected by Benzler. Mr. Rock agreed and pointed out in relation to the Abshire case, a battalion chief in the fire department would be eligible for overtime because of how time was tracked.
Ms. Matteucci requested AB316 be moved through the legislative process in order to expedite the scheduled first payout on April 9 to all SNEA employees and April 23 to all others. The bill must be approved in order to have the money budgeted or budgetary problems will result. Additionally, she requested the appropriation be increase to $4,652,173 to cover the Gaming Control Board liability which was not included in the original amount and the bill be amended for the retroactive portion of the highway fund for DMV in the amount of $398,635.
Chairman Arberry requested the requested changes be submitted in writing. Ms. Matteucci indicated she would.
Mr. Bob Gagnier, SNEA Executive Director introduced himself and Ms. Norah Ann McCoy, SNEA Legal Counsel.
Mr. Gagnier stated because of the amount of monies and the seriousness of the issues being discussed, he would provide a history to clarify the situation as it currently stands.
Mr. Gagnier explained in 1988, SNEA filed a federal lawsuit on behalf of its members within the Department of Prisons. The case was necessitated by the fact the Department of Prisons was directing its staff to work long hours of overtime, denying them cash payment and then forcing them to take compensatory time off at the convenience of the agency. Under the FLSA, the law provides that when there is a recognized employee organization, the employees cannot be paid comp time for their overtime UNLESS there is an agreement between the organization and the employer. Mr. Gagnier stated the case was SNEA v. Sumner.
He explained SNEA won the case at the District court level and it was affirmed by the Ninth Circuit court of Appeals. The Department of Prisons would have to pay all SNEA members cash for the overtime unless there was a written agreement between SNEA and the employer for comp time. He emphasized the Department of Prisons immediately retaliated against SNEA by issuing a memo stating no SNEA member would be permitted to work overtime. After SNEA pointed out the memo was a further violation of federal law, it was withdrawn. Mr. Gagnier indicated the Department eventually entered into negotiations and an agreement was signed in May 1991 (see EXHIBIT I). He noted the agreement has worked very well and the Director of Prisons has already suggested it be signed for another two years unchanged.
Mr. Gagnier testified, in 1990, the Ninth Circuit Court of Appeals rendered the Abshire v. Kern decision which made it clear most public employees, regardless of their duties, were nonexempt from the FLSA. SNEA provided a copy of that decision to the Budget Director, suggested the decision affected Nevada and urged negotiations on the matter. SNEA met with representatives of the administration several times in an effort to resolve the issue in a manner which would least impact the state financially. SNEA did this in good faith and did not proceed with legal action to force the state to comply.
Mr. Gagnier stated the first SNEA knew negotiations were over was when AB576 of the Sixty-sixth session was introduced by the administration. This bill was intended to negate the effects of the Abshire decision as applied to Nevada. He pointed out he spoke against the bill in the Ways and Means Committee and testified that it would not stand legal muster. Mr. Gagnier emphasized as soon as the legislation was introduced, SNEA started to put the legal case together. The case was filed in May and eventually a federal judge combined SNEA's case with one previously filed by a group who did not try to negotiate.
Mr. Gagnier stated, in July 1992, the federal judge granted summary judgment for the plaintiffs in most of what SNEA asked. At the court's urging, a settlement conference was held and it was settled. AB316 purports to be the bill necessary for the costs of the settlement.
He remarked there was a separate element in SNEA's portion of the case which did not exist for the non-SNEA plaintiffs. Based upon the Department of Prisons' case, the judge ruled that SNEA members were entitled to cash for all overtime absent an agreement. The state could pay the other plaintiffs in cash or comp. time as the state saw fit. Through the discussions, SNEA's position has remained unchanged as the employees should have their choice of cash or comp. time.
Mr. Gagnier asserted SNEA has maintained, since the first FLSA lawsuit, the decision went beyond the Department of Prisons and affected all agencies. The state ignored this and when the ramifications of the latest lawsuit began to be understood, there was concern in many agencies about the fiscal impact.
He stated he wrote the governor on January 7, 1993 (see page 1 of EXHIBIT I) in an effort to get a uniform agreement for state government. A response was not received so SNEA wrote to Ms. Matteucci on January 12, 1993 with a copy sent to all agencies (see pages 2 and 3 of EXHIBIT I) who have SNEA membership. Following this letter, SNEA immediately began to receive calls from agencies interested in holding down their costs. SNEA has attempted to tailor these agreements to the needs of the SNEA members and the agencies involved. (See pages 4-8 of EXHIBIT I) He pointed out the first of the new agreements was with the Office of the Secretary of State.
Mr. Gagnier remarked SNEA and many of the agency administrators who negotiated these agreements did so with the understanding the agreement would apply to current overtime on the books. Agencies were receiving conflicting advice. Finally, SNEA was able to ascertain the Attorney General's office had advised the various pay centers to pay all existing comp time in cash for SNEA members, notwithstanding the good faith agreements allowing a choice of cash or comp time. Mr. Gagnier emphasized SNEA's legal counsel had discussed this with the deputy Attorney General involved and it became obvious there was a difference of opinion which Ms. McCoy can address.
Mr. Gagnier reiterated SNEA's position is simple. Where there is an agreement between SNEA and the agency, comp time may be paid to SNEA members in accordance with the agreement for EXISTING [sic] and future overtime. He noted in the past SNEA has been criticized because they demanded the employee be given a choice of cash or comp time. SNEA was told it was too expensive. Now it is the administration which is demanding all SNEA members receive all cash.
Mr. Gagnier reiterated SNEA believes they have shown the legislature a method whereby the amounts in this bill can be lessened because of agreements SNEA has entered into. SNEA attempted to negotiate two years ago and have negotiated this year. The results of the negotiations can substantially lessen the amounts in AB316.
Mr. Gagnier emphasized a totally separate issue is the amount of money contained in this bill to pay off the comp time balances for those employees who the administration hopes to include in the proposed "Exempt Merit" class. He stressed the legislature is being asked to set aside money for something they have not yet approved and which may not stand legal muster. SNEA has already begun the legal research to challenge this new class, at least in the sweeping manner proposed by the administration. SNEA has also been in contact with the U.S. Department of Labor.
Mr. Gagnier suggested the committee remove that portion of money from AB316 and asked it be contained in a separate bill if and when the "Exempt Merit" class is approved. He reiterated if it is left in this bill, the implication may be the new class will be approved without benefit of a hearing, testimony or even knowing what the new class really is.
Mr. Marvel inquired on the status of SNEA's research on the legality of the exempt status. Mr. Gagnier replied SNEA's research has found two issues for discussion to determine if legal action will be necessary. The first is whether the action is retaliatory for the action by employees who exercised their rights under the FLSA. Mr. Gagnier pointed out the administration has already admitted the new classification is a result of this federal action. The second issue is if the administration is taking current employee benefits away or reducing compensation.
Mr. Price asked Mr. Gagnier if he would prefer to represent SNEA members rather than go to court all the time. Mr. Gagnier agreed he would. Mr. Price commented he has found one of the main problems with contractual and perhaps legal relationships between labor and management is that frontline supervisors do not understand the law or contracts and asked Mr. Gagnier if he found this to be true. Mr. Gagnier indicated because SNEA does not have collective bargaining, he was unable to answer.
Mr. Price suggested providing some type of labor/management seminars to facilitate cooperation and understanding between and within the groups could avoid these types of issues, situations and, most importantly, loss. He asked for input on ways to provide a seminar between the state and the various employee units involved. Mr. Gagnier replied certainly labor and management cooperation can be quite helpful, but what form it should take he was not sure.
Ms. McCoy, SNEA Legal Counsel, discussed her memo and law citations included as pages 9-13 of EXHIBIT I. She stated following the decision in the Benzler case, SNEA entered into a number of agreements with various state agencies allowing them to give compensatory time to SNEA members for overtime worked if it was the employee's choice. This is the basis for all agreements; the employees have the choice of cash versus comp. time. These agreements were entered into in an attempt to save money for the state agencies and some SNEA members preferred comp. time.
Ms. McCoy indicated SNEA had discovered during the process the Attorney General's office was advising agencies the FLSA itself prohibits any retroactive application of agreements, therefore agreements must be in effect prior to the work performance. She stated, with respect to the Attorney General's office, SNEA strongly disagrees with its position and interpretation of the law.
Ms. McCoy provided two sections of law as quoted in her memo (see EXHIBIT I pages 9-13). She pointed out there are two aspects addressed. The FLSA is a federal statute with interpretive regulations. She stated the law says the FLSA allows a public employer to give compensatory time in lieu of cash overtime payment, but only pursuant to applicable provisions of a collective bargaining agreement, memorandum of understanding, or any other agreement between the public agency and representative of such employees or in the case of employees not covered by subclause (i) an agreement or understanding arrived at between the employer and employee before the performance of the work.
Ms. McCoy indicated, therefore, the statute requiring an agreement prior to work applies only to those unrepresented employees. She said there was no such restriction in the section she cited where employees are represented by a recognized representative. She pointed out there is a reasonable and logical basis for the distinction because when an employer is dealing with individual employees the factors of coercion and duress are present whereas those factors are not present when the employer is dealing with the representative of employees.
Ms. McCoy indicated the attorney general has presumably read the statute and she reiterated the distinction between employees and representatives of employees, but the Attorney General's office has based its advice on its interpretation of the regulation relating to the statute. The regulation, 29 C.F.R. 553.23 (included as page 13 of EXHIBIT I) consists of a number of paragraphs. She stated the first paragraph states "As a condition for use of compensatory time in lieu of overtime payment in cash, section 7(o)(2)(A) of the Act requires an agreement or understanding reached prior to the performance of work." Ms. McCoy emphasized reading the first sentence may lead someone to believe the statement is a blanket requirement. She reiterated by reading on in the regulation the requirement is clarified: "This can be accomplished pursuant to a collective bargaining agreement, a memorandum of understanding or any other agreement between the public agency and representatives of the employees. If the employees do not have a representative, compensatory time may be used in lieu of cash overtime compensation only if such an agreement or understanding has been arrived at between the public agency and the individual employee before the performance of work."
Ms. McCoy reiterated the general provision is clear and sections (2) (b) and (c) differentiate between the two also. She remarked she saw no basis in law or fact for the Attorney General's view of this regulation or the law requiring SNEA agreements be reached prior to the performance of work and thus cannot be applied retroactively.
Chairman Arberry acknowledged SNEA and the Attorney General's office each has its own opinion, but he asked what the final decision was from the Court. Ms. McCoy replied the Judge said SNEA members are entitled to cash payment for overtime if this is their choice. Chairman Arberry asked if "if this is their choice" is included in the judge's decision. Ms. McCoy said no, it states they are "entitled." She cited the bottom of page 16 line 23 to page 17 line 1 (EXHIBIT G) of the order which states "since plaintiffs are members of SNEA, and since SNEA is the authorized representative of plaintiffs, plaintiffs are entitled to cash payment for all overtime worked because no contract exists between defendants and SNEA for overtime payment by compensatory time."
Chairman Arberry indicated this concerned him because Ms. McCoy said SNEA members have the option to take cash or comp time. Ms. McCoy replied SNEA hopes to achieve this by the agreements. She reiterated the law basically states in the absence of agreements with the representative, the agency must pay cash, but if an agreement exists, the employee can choose cash or comp time. Ms. McCoy pointed out one thing that has resulted from the Benzler decision and the agreements with the agencies was a memo within the Department of Human Resources stating SNEA members would have the option of either cash or comp time for future overtime worked. Additionally, it stated, for accrued and existing comp time on the books, cash can be paid unless members choose comp time wherein they would need to sign a waiver to that effect.
Ms. McCoy stated she thought the memo was an excellent solution to the Attorney General's fears over future potential liability. She explained if employees were willing to have their signed waiver on file verifying their choice, future liability could be prevented. She reiterated the law does not prohibit this type of agreement or the retroactive effect and there are very simple ways to limit or eliminate potential future liability in this case.
Ms. Giunchigliani asked for a definition of liquidated damages. Ms. McCoy stated, in the context noted, it is whatever the damages are for back overtime again or double the amount. Ms. Giunchigliani commented from 1988-1991 the Attorney General is interpreting SNEA members are eligible for cash only while other state employees could choose comp time or cash and henceforth, if an agreement is entered into they can take one or the other. Mr. Gagnier clarified by state law and regulations, the employers will choose cash or comp time option, not the employee. In some instances, the state is allowing the option, but by law it is the employer who has the right to decide. Ms. Giunchigliani pointed out some employees are being treated differently as a result of how the statute and regulations are being interpreted.
Ms. Giunchigliani reiterated just because the order states they are entitled to the payout, the order does not mandate how it is to be paid. She clarified SNEA asked to have section 1 subsection C of AB316 stricken because exempt merit status has not been decided on. Also, SNEA argues the judge's order does not preclude entering into agreements which would be retroactive. Mr. Gagnier stressed there could be a problem if the agreement is too open-ended and the legislature would be unable to determine what its economic liability will be and a time-limit could be imposed on SNEA members to make their choice for budgetary purposes.
Ms. Giunchigliani asked if departments currently have comp time included under operating expenses. Ms. Matteucci replied comp time is not budgeted, but services are lost. Therefore the liability remains and it is a payout if the employees leaves state services. Ms. Giunchigliani wondered if there was a "use it or lose it" clause. Ms. Matteucci stated there is a cap.
Mrs. Evans commented she understood allowing the option for SNEA members, but she voiced her concern for future liability with those non-SNEA members who would come back and say they did not want comp time, but they were urged or pressured to take it versus the cash payout. She asked if this would still leave the state open for liability. Mr. Gagnier said he could not provide legal advice, but noted the state is always open to suit.
Mrs. Evans commented she still was not sure what was included or not in the bill and asked to be provided with further clarification.
Mrs. Williams inquired if there was a difference between "entitled" and "required" in the judge's order. Ms. McCoy replied probably not, but it depends on the context. She explained in any lawsuit, when the plaintiff wins they receive an "entitlement" which is correlative to a requirement or an obligation on the defendant to pay. Mrs. Williams commented in this situation where there are some choices, is the exact order of the judge to pay the cash or to have the state and the employees work it out. Ms. McCoy stated, generally, the FLSA allows agreements between representatives and employers excepting the complete elimination of time and a half or drop to a level below the minimum wage. The Department of Labor and the courts typically have a hands-off view of agreements between representatives and employers. Ms. McCoy reiterated this law allows for the agreement of other matters related to comp. time such as when it can be taken, when it can be worked, and such.
Mr. Gagnier commented the issue of overtime in Nevada is too lax. He stated SNEA does not believe the regulations which exist are being complied with regarding whether people are directed to work overtime or just do it on their own. He explained the regulations and law would appear to say an authorized person has to authorize the overtime, but that may not be occurring. He suggested the broader issue may need to be addressed as to the amount of overtime which is occurring and therefore running up the costs.
Chairman Arberry closed the hearing on AB316.
Chairman Arberry adjourned the hearing at 10:15 a.m.
RESPECTFULLY SUBMITTED:
_________________________
Kerin E. Putnam
Committee Secretary
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Assembly Committee on Ways and Means
March 15, 1993
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