REPORT IN BRIEF

This report recommends adoption of a Severance Benefit for nine (9) Regular employees who will be affected by layoffs caused by the current fiscal situation in the Department of Employment Development and the Department of Public Works, Fleet Division.

BACKGROUND

On December 2, 2003 the City Council adopted Budget Modification No. 20 to reduce the amount of Workforce Investment Act funds available to the Department of Employment Development.  The reduction was a direct result of several grant-funded activities not being renewed by the State of California for FY 2003/2004.  This Budget Modification also resulted in the elimination of ten allocated positions.   The two positions being eliminated in the Public Works Department are the result of service reductions as a result of the budget adopted for FY 2003-2004.

The State’s budget crisis, however, will continue to impact the City’s financial situation, and the amount of funds the City will receive from the State continues to remain uncertain. 

As a result of this fiscal event, nine (9) regular employees will be laid off. Although there is no legal requirement for a severance benefit, the adoption of employee assistance for those being terminated is requested.  In September 2003, the City Council adopted a similar package for employees similarly situated.

This report requests authority to provide a three month City reimbursement towards COBRA (extension of health benefits) for eight (8) employees separated as a result of the positions eliminated by Budget Modification #20 in the Department of Employment Development and for the one (1) additional employee in the Department of Public Works.

DISCUSSION

City Council has directed this assistance for three (3) months. This reimbursement applies to nine (9) regular employees and it does not extend into future years’ layoffs.

This report recommends continuing City’s fixed current contribution in the cost of medical dental, vision and EAP coverage through COBRA. Under COBRA regulations which provide for continuation of existing health plans, laid off employees are eligible for up to eighteen months of continued coverage at the City’s group rates for the employee assistance program, medical and dental insurance, plus an additional 2% carrier imposed administrative charge at their own expense.

It is proposed that the City continue, under COBRA, its current contribution for three months for eligible regular employees or until they secure other coverage, whichever comes first. Eligible employees will be responsible for their contribution for health plans as when they were employed by the City.  Employees will be eligible for the maximum period of coverage as long as they continue to pay for their share of these benefits after the City’s contribution is exhausted.  The City’s contribution will be made through reimbursements when employees present proof of payment for continuation of coverage, under COBRA.  The employee will pay the 2% COBRA administrative cost.

FISCAL IMPACT

The current estimated cost for this severance benefit is $12,150. This amount is only for the City contribution towards insurances. Funds are available for this one-time cost from savings from the premium reductions in the dental and life insurance programs in the Benefits Fund. This represents the maximum projected cost and is intended to be applied to the benefits of these additional nine (9) employees being laid off during this fiscal year.  It is possible this cost may be reduced, if positions are found for the affected employees.

PUBLIC CONTACT

Public Contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the City Clerk’s Office.

ALTERNATIVES

1. Adopt the Severance Benefit for Fiscal Year 2003/04 for the benefit of laid off employees and authorize the Director of Human Resources to implement the procedures to administer this assistance.

2. Do not adopt the Severance Benefit for laid off employees for Fiscal Year 2003/04.

RECOMMENDATION

Adopt Alternative No. 1.

Prepared by: