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RPVCCA_CC_SR_2012_02_21_05_Agency_Shop_AgreementCITY OF MEMORANDUM RANCHO PALOS VERDES TO: FROM: DATE: SUBJECT: REVIEWED: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL ROY A.CLARKE,LABOR &EMPLOYMENT COUNSEL FEBRUARY 21,2012 AGENCY SHOP AGREEMENT BETWEEN THE CITY OF RANCHO PALOS VERDES AND THE RANCHO PALOS VERDES EMPLOYEES ASSOCIATION CAROLYN LEHR,CITY MANAGER ~ RECOMMENDATION Adopt Resolution No.2012-_,approving an agency shop agreement and authorizing the City's labor relations representative to implement the agreement. DISCUSSION The agreement was considered by the City Council at two prior meetings,and we were asked to provide additional information on several issues.We have summarized the responses in the "Additional Information"section,below.No changes are recommended for the agreement.The implementation paragraph in the resolution has been changed,as directed previously by the City Council. California public sector labor law,as applicable to cities,expressly provides for the establishment of an agency shop in a bargaining unit represented by a union recognized as the exclusive representative.The exclusive representative has an obligation to represent all employees in the unit.An agency shop requires unit employees to either join the union or to pay a service fee for representation.An agency shop may be implemented pursuant to agreement between the public agency and union,or without agreement by petitioning the California Division of Conciliation of the Department of Industrial Relations for an election. The City Council recognized the Rancho Palos Verdes Employees Association ("Association")on October 18,2011,as the majority representative in a unit of non- management,full-time employees.The Association requested implementation of an agency shop agreement in early November.Subsequently,the Association submitted proof to staff that well over half of the employees in the bargaining unit support 5-1 Approval and Implementation of Agency Shop Agreement February 27,2012 Page 2 of4 establishment of an agency shop.The City Attorney's Office prepared a draft agreement which has been accepted by the Association with one minor change.The change adds the words "upon request"in Paragraph 9 of the agreement.This is the only change to the draft agreement distributed to the City Council on December 20. "The Association will keep an adequate itemized record of its financial transactions and shall make available annually.upon request.to the City and to the employees who are members of the Association, within 60 days after the end of its fiscal year,a detailed written financial report thereof in the form of a balance sheet and the opening statement,certified as to accuracy by its president and treasurer or corresponding principal officer or a certified public accountant,as provided in Government Code §3502.5(f)." Councilmember Campbell inquired if the words "upon request"would place an undue burden upon the employees,should they wish to receive a report.Since the Association represents the non-management employees,we are not aware of any reason why a request by an employee to receive the report would create any problem for the Association or be an impediment to an employee's ability to obtain information from the Association about its financial transactions. ADDITIONAL INFORMATION Hudson Procedure Paragraph 10 of the agreement requires a "Hudson Procedure"that complies with the minimum requirements of the Public Employment Relations Board's (PERB)regulations. An explanation of this term was requested.The Hudson Procedure is the process by which non-members receive an explanation of how the agency fee was calculated and notice of the procedure to challenge the fee before an impartial decision maker.It is the method by which non-members prevent their money from being used for purposes that are not germane to the union's collective bargaining and representation duties.The name is taken from the U.S.Supreme Court's decision in Teachers v.Hudson,475 U.S.292 (1986),setting forth the minimum procedural requirements that public sector unions must follow for notice and for resolving agency fee objections. Audit Requirements Inclusion of an annual audit requirement was suggested for the agreement.The agreement currently includes financial reporting and audit/certification requirements related to the agency fee and Hudson Procedure.Paragraph 9 of the agreement requires the union to keep an itemized record of financial transactions and to prepare an annual financial report that is certified as to accuracy by the president and treasurer or a certified public accountant,as provided in Government Code §3502.5(f).Paragraph 10 incorporates PERB's requirement that the data used to calculate the agency fee be based 1417203 5-2 Approval and Implementation of Agency Shop Agreement February 27,2012 Page 3 of4 on an audited financial report or be certified by an independent auditor as correct. For employee organizations with annual revenue of $50,000 or less,the agency fee calculations may be based on an unaudited financial report as long as a procedure is in place to allow the nonmember to independently verify that the employee organization spent its money as stated.Financial reporting and audit requirements are set by statute and regulation.We do not recommend additional requirements and would be concerned that additional requirements may be judged unreasonable by an outside reviewer. Part-Time Employees We were asked about the impact of agency fees on part-time employees and how the agreement assures that agency fees will not be a major percentage of the take home pay for part-;time employees with low pay.The bargaining group is defined to include only full- time employees.Consequently,part-time employees are not covered by the agency shop or impacted by the agency shop agreement. Indemnification As noted,an agency shop can be implemented pursuant to an agreement or pursuant to a petition filed with the California Division of Conciliation of the Department of Industrial Relations.State law gives employees the right to implement an agency shop. What is left to the parties is whether the agency shop is subject to the terms of an agreement or the default terms provided by law. If implemented without an agreement,the indemnification provided to the City is set by statute in California Government Code §3502.5(b): "In the event of an agency fee arrangement outside of an agreement that is in effect,the recognized employee organization shall indemnify and hold the public agency harmless against any liability arising from a claim, demand,or other action relating to the public agency's compliance with the agency fee obligation." The indemnification provided in the Agreement is: "13.The Association agrees to defend,indemnify and hold harmless the City and its officers,employees and agents against any and all claims, demands,proceedings,suits and liability arising,directly or indirectly,out of any action taken or not taken by or on behalf of the City in any way related to this Agreement or the City's compliance with the agency fee obligations.The City reserves the right to select and direct legal counsel, at Association expense,in the event of any challenge to the City's compliance with the agency fee obligation." 1417203 5-3 Approval and Implementation of Agency Shop Agreement February 27,2012 Page 4 of 4 We were asked to talk with the Association's representative and confirm the Association's insurance and financial status.That conversation confirmed that the Association does not have insurance or any substantial assets.Obviously,they do collect regular dues from their members and are not entirely without resources.The City does not have the legal ability to avoid the agency shop,and some indemnification of the City is better than none. The indemnification in the agency shop agreement is more favorable to the City than the terms available through the Government Code.This is true even if the Association's resources are not what the City would require in a true arm's-length agreement where the City has the legal ability to walk away from the transaction.Accordingly,we recommend approval of the agreement that is attached to this report. CONCLUSION Employees have the right to implement an agency shop.An employer's interest is generally limited to procedural issues.The proposed agency shop agreement sets reasonable procedures,as typically adopted by California cities,for implementation of the agency shop.Staff recommends the City Council approve the agency shop agreement. Attachments Resolution No.2012-_, Agency Shop Agreement 1417203 5-4 RESOLUTION NO.2012- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES,APPROVING AN AGENCY SHOP AGREEMENT BETWEEN THE CITY OF RANCHO PALOS VERDES EMPLOYEES ASSOCIATION AND THE CITY OF RANCHO PALOS VERDES AND PROVIDING FOR ITS IMPLEMENTATION. WHEREAS,the City of Rancho Palos Verdes recognized and certified the Rancho Palos Verdes Employees Association (Association)on October 18,2011 as the recognized exclusive employee organization for the designated non- management employees of the City for purposes of employer-employee relations under the Myers-Milias-Brown Act (MMBA),government Code Section 3500- 3511 and regulations of the Public Employment Relations Board (PERB).8 Cal. Code Reg.Section 31001-32997;and WHEREAS,the MMBA expressly provides for adoption of an agency shop agreement in a bargaining unit with a recognized exclusive representative;and WHEREAS,the Association has requested implementation of an agency shop agreement and provided proof that well over half the eligible employees in the unit desire an agency shop;and WHEREAS,representatives of the City and the Association have mutually agreed to tentative terms,pending City Council approval,for the agency shop agreement; NOW,THEREFORE,THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES DOES HEREBY FIND,DETERMINE AND RESOLVE AS FOLLOWS: Section 1:The Agency Shop Agreement between the City of Rancho Palos Verdes and the Rancho Palos Verdes Employees Association,a copy of which is attached to and incorporated by reference into this resolution,is hereby approved. Section 2:The City's principal management representative(s)shall implement and administer the terms of the Agency Shop Agreement on behalf of the City. Section 3:This resolution shall take effect immediately. 5-5 PASSED,APPROVED,and ADOPTED this 21 st day of February 2012. Mayor ATTEST: City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES )ss CITY OF RANCHO PALOS VERDES ) I,Carla Morreale,City Clerk of the City of Rancho Palos Verdes,hereby certify that the above Resolution No.2012-_was duly and regularly passed and adopted by the said City Council at a regular meeting thereof held on February 21,2012. City Clerk 5-6 Agency Shop Agreement City of Rancho Palos Verdes and Ranchos Palos Verdes Employees Association 1.The City of Rancho Palos Verdes (City)and the Rancho Palos Verdes Employees Association (RPVEA or Association)enter into this Agreement to implement an agency shop agreement,pursuant to California Government Code §3502.5 and other applicable law.The City is a "public agency"and the Association is recognized as the exclusive or majority representative in the appropriate unit established by the City.Employees in the unit have demonstrated their support for an agency shop by presenting a written petition for an agency shop signed by a majority of the employees in unit. 2."Agency Shop,"as used in this Agreement,means "an arrangement that requires an employee,as a condition of employment,either to join the recognized employee organization or to pay the organization a service fee in an amount not to exceed the standard initiation fee, periodic dues and general assessments of the organization."The "service fee"may also be referenced as an "agency fee"or "agency shop fee"under applicable law and in this Agreement. 3.This Agreement will be placed in effect for the first full month following execution by the Association and approval by the Rancho Palos Verdes City Council.Unless otherwise agreed,all dues,service fees or charitable contributions (if eligible)for the month will be deducted from the second paycheck of each month. 4.The parties recognize that employees in the unit have the right to join or not to join the Association.Pursuant to an agency shop agreement,as provided under State law and this Agreement,employees must either voluntarily join the Association or must pay a service fee. The amount of the service fee will be a uniform amount established by the Association and limited as provided by law.The amount of the service fee and any changes in the fee will be certified in writing to the City by the President of the Association. 5.Any employee who is a member of a bona fide religion,body or sect that has historically held conscientious objections to joining or financially supporting public employee organizations shall not be required to join or financially support any public employee organization as a condition of employment. a.The employee will be required,in lieu or periodic dues,initiation fees,or agency fees,to pay sums equal to the dues,initiation fees or agency fees to a nonreligious and nonlabor charitable fund exempt from taxations under Section 501(c)(3)of the Internal Revenue Code.The employee may choose the organization from a list of at least three qualifying organizations designated by written agreement between the City and Association or,ifnot so designated,then any qualifying charity chosen by the employee. If the employee refuses to choose a qualified charity,the City and Association will mutually designate the charity. b.In the event of a dispute between the employee and Association regarding religious exemption status,the Association will provide for an adjudication process,at Association expense,before a neutral hearing officer who is not associated with the R6876-1076\1409283vl.doc 5-7 Association or its representatives.In the event of such a dispute,the charitable deduction will commence but will be held in escrow pending resolution of the dispute. 6.Covered employees will execute written authorization for either Association dues deductions,the agency fee,or,if eligible,the charitable contribution.In the absence of a written authorization,the employee will be deemed an agency fee payer and City will deduct the agency fee from the employee's paycheck. 7.Dues and service fees withheld by the City will be transmitted to the Treasurer of the Association as the person authorized to receive such funds,at the address specified in writing. The Association agrees to promptly refund to the City any amounts paid in error.Charitable contributions,if applicable,will be transmitted to the applicable charity. 8.The employee's earnings must be regularly sufficient after other legal and required deductiollS are made to cover the amount of the dues or fees authorized.When an employee is in non-pay status for the entire second pay period of the month,no withholding will be made to cover that month from future earnings,nor will the employee be permitted to deposit the amount with the City that would have been withheld.When an employee is in non-pay status for part of the second payroll period of the month and the salary is insufficient to cover the full withholding after other deductions,no deduction will be made.All other legal and required deductions (including group medical and insurance plans)and limits on withholding will have priority over Association dues and service fees.Payment of dues or service fees during non-pay status or where earnings are insufficient are to be addressed directly between the member and Association. 9.The Association will keep an adequate itemized record of its financial transactions and shall make available annually,upon request,to the City and to the employees who are members of the Association,within 60 days after the end of its fiscal year,a detailed written financial report thereof in the form of a balance sheet and the opening statement,certified as to accuracy by its president and treasurer or corresponding principal officer or a certified public accountant, as provided in Government Code §3502.5(t). 10.The Association will establish and thereafter provide the City with a copy of its current "Hudson Procedure"for the determination and protest of its agency fees.The Hudson Procedure will,at a minimum,comply with the minimum requirements of Public Employment Relations Board regulations 32992 -32994.The Association will provide a copy of the Hudson Procedure to every service fee payer within one month of this Agreement going into effect,annually thereafter and as a condition of any change in the agency fee.The Association will provide a copy of its Hudson Procedure to each employee newly covered as an agency fee payer after the implementation of this Agreement,upon learning the identity of such fee payer. 11.Except as expressly provided in this Agreement,the procedures for voluntary dues deductions,as agreed between the City and Association,will remain in effect. 12.Following implementation,this Agreement (including the agency shop)may be rescinded by a majority of all votes cast by employees in the unit.In the event the agency shop is rescinded pursuant to a majority vote of employees,the Association agrees not to request, -2- R6876-1076\1409283vl.doc 5-8 petition for,negotiate for or otherwise seek an agency shop for one calendar year from the date of the final agency fee payroll deduction following the rescission vote.Rescission will be subject to the following conditions: a.A request for such a vote must be supported by a petition,filed with the City's designated labor relations representative,containing the signatures of at least 30 percent of the employees in the unit;, b.The vote is by secret ballot;and c.The vote may be taken only once per year measured from the latter of the date this Agreement becomes effective or the date of the last rescission election. 13.The Association agrees to defend,indemnify and hold harmless the City and its officers, employees and agents against any and all claims,demands,proceedings,suits and liability arising,directly or indirectly,out of any action taken or not taken by or on behalf of the City in any way related to this Agreement or the City's compliance with the agency fee obligations.The City reserves the right to select and direct legal counsel,at Association expense,in the event of any challenge to the City's compliance with the agency fee obligation. 12.Representatives of the City and Association have reached agreement on the above terms in response to the Association's request for an agency fee agreement and written proof of majority support for such an agreement.The terms outlined above represent ajoint recommendation to the City Council for its determination and approval.This Agreement will not be effective unless and until approved by the City Council. Association President Treasurer City Principal Management Representative Date:_______,2011 -3- Date:_______"2011 R6876-1076\1409283vl.doc 5-9