Legal Alerts Feb 1, 2018

CalPERS Employers are Now Subject to Two New Penalties

New Laws Change Out-of-Class Appointments Requirements and Impose New Penalties in Connection with Retired Annuitant Employment

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Two new California laws could result in costly fines to public agency employers who fail to adhere to the specified requirements. Assembly Bills 1487 and 1309 both went into effect Jan. 1.

AB 1487 – Out-of-Class Appointments 
Public employers that contract with CalPERS should take note of AB 1487, which adds section 20480 to the Government Code. Section 20480 provides that an out-of-class appointment of an active member by a CalPERS contracting agency or school employer that exceeds 960 hours in a fiscal year will be subject to penalties. The law defines “out-of-class appointment” to mean a limited duration appointment to an upgraded position or higher classification that is vacant during recruitment for a permanent appointment. As such, section 20480 does not apply to positions filled during an employee’s leave of absence. While employers may want to take the position that section 20480 does not apply with respect to a vacancy for which there is no recruitment, our CalPERS contacts have informed us that the only exception is for vacancies arising as a result of a leave of absence.  
 
Employers must track the hours worked in these positions and report them to CalPERS within 30 days after the end of the fiscal year. Further, compensation for an out-of-class appointment subject to section 20480 must be paid pursuant to a collectively bargained agreement or publicly available pay schedule.
 
Any employer in violation of section 20480 will be liable to pay CalPERS an amount equal to three times the employer and employee contributions that would otherwise have been paid to CalPERS for the difference between the compensation paid for the out-of-class appointment and the compensation reported to CalPERS for the employee’s permanent position. Non-compliance may also lead to administrative costs and other penalties.
 
This new restriction may significantly impact employers who, for various reasons, have appointed employees to a vacancy on an acting or interim basis pending a permanent appointment or a determination of whether to permanently fill a position. While section 20480 applies the 960-hour limitation on a fiscal year basis, we have confirmed with CalPERS that the limitation will only apply as of Jan.1, and that the entire 960 hours will be available for the 6-month period through June 30. Thereafter, the 960-hour limitation will be in effect each year from July 1 through June 30.
 
AB 1309 – Retired Annuitant Employment Reporting Obligations 
AB 1309 amends existing Government Code section 21220 to provide that CalPERS may impose a penalty equal to $200 per month per retiree for each of the following failures until it is corrected.
 
First, the penalty will be imposed if the employer fails to enroll the CalPERS retiree through the my|CalPERS portal within 30 days after the effective date of hire. Since a CalPERS retiree hired in accordance with the retiree employment rules will not accrue service credit or retirement benefits for the retiree employment, the enrollment is solely for purposes of tracking that retiree’s hours, pay and duration of the appointment.
 
Second, the penalty will apply if the employer fails to report the rate of pay and hours worked by the retiree within 30 days following the last day of the pay period worked by the CalPERS retiree.  
 
While these reporting obligations existed prior to AB 1309, CalPERS did not have the authority to impose a penalty against those agencies that failed to comply. Thus, it will be important for CalPERS contracting agencies to review existing retiree appointments and ensure that they are complying with the reporting obligations.
 
If you have any questions about these new laws or how they may impact your agency, please contact the authors of this Legal Alert listed to the right in the firm’s Employee Benefits & Executive Compensation and Labor & Employment practice groups, or your BB&K attorney.
 
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Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.
 

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