BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 407
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          Date of Hearing:   June 26, 2013

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                           K.H. "Katcho" Achadjian, Chair
                      SB 407 (Hill) - As Amended:  April 1, 2013

           SENATE VOTE  :   35-0
           
          SUBJECT  :   Local government: officers and employers: contracts

           SUMMARY  :   Extends limitations on local agencies' employment  
          contracts to cover additional employees.  Specifically,  this  
          bill  :

          1)Expands existing law that prohibits an employment contract for  
            a local agency executive from providing an automatic renewal  
            of a contract to include any person who is a deputy or  
            assistant chief executive officer, and any person whose  
            position is held by an employment contract between that person  
            and the local agency.

          2)Provides that if the Commission on State Mandates determines  
            that the bill's provisions contain costs mandated by the  
            state, then reimbursement to local agencies and school  
            districts for those costs shall be made.

           EXISTING LAW  :

          1)Prohibits an employment contract for a local agency executive  
            from providing an automatic renewal of a contract that  
            provides for an automatic compensation increase in excess of a  
            cost-of-living adjustment or a maximum cash settlement in  
            excess of certain limits, as specified. 

          2)Defines "local agency executive" to mean any person employed  
            by a local agency who is not subject to the  
            Meyers-Milias-Brown Act, as specified, and who meets either of  
            the following criteria:

             a)   The person is the chief executive officer of the local  
               agency; or,

             b)   The person is the head of a department of a local  
               agency.









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          3)Defines "local agency" to mean a county, city, whether general  
            law or chartered city and county, town, school districts,  
            municipal corporation, district, political subdivision, or any  
            board commission, or agency thereof, or other public agency.

          4)Defines "compensation" to mean annual salary, stipend, or  
            bonus, paid by a local agency employer to a local agency  
            executive.

          5)Defines "cost-of-living" to mean the California Consumer Price  
            Index for Urban Wage Earners and Clerical Workers as  
            calculated by the Department of Industrial Relations.

          6)Prohibits, on or after January 1, 2012, any contract executed  
            or renewed between a local agency and a local agency  
            executive, from providing for the following:
             a)   An automatic renewal of a contract that provides for an  
               automatic increase in the level of compensation that  
               exceeds a cost-of-living adjustment; and,

             b)   A maximum cash settlement that exceeds the amounts  
               determined as specified in the Government Code for officers  
               and employees in local agencies.

          7)Requires all contracts of employment between an employee and a  
            local agency employer to include a provision which provides  
            that regardless of the term of the contract, if the contract  
            is terminated, the maximum cash settlement that an employee  
            may receive shall be an amount equal to the monthly salary of  
            the employee multiplied by the number of months left on the  
            unexpired term of the contract.  However, if the unexpired  
            term of the contract is greater than 18 months, the maximum  
            cash settlement shall be an amount equal to the monthly salary  
            of the employee multiplied by 18.

          8)Requires, on or after January 1, 2012, any contract executed  
            or renewed between a local agency and an officer or employee  
            of a local agency that provides paid leave salary offered by  
            the local agency to the officer or employee pending an  
            investigation, that any salary provided for that purpose be  
            fully reimbursed if the officer or employee is convicted of a  
            crime involving an abuse of his or her office or position.

          9)Requires, on or after January 1, 2012, any contract executed  
            or renewed between a local agency and an officer or employee  








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            of a local agency that provides funds for the legal criminal  
            defense of an officer or employee, that any funds provided for  
            that purpose be fully reimbursed to the local agency if the  
            officer or employee is convicted of a crime involving an abuse  
            of his or her office or position.

          10)Requires, on or after January 1, 2012, any contract of  
            employment between an employee and a local agency employer to  
            include a provision which provides that, regardless of the  
            term of the contract, if the contract is terminated, any cash  
            settlement related to the termination that an employee may  
            receive from the local agency shall be fully reimbursed to the  
            local agency if the employee is convicted of a crime involving  
            an abuse of his or her office or position.

          11)Requires, on or after January 1, 2012, if a local agency  
            provides, in the absence of a contractual obligation, for any  
            of the payments described in this article, then the employee  
            or officer receiving any payments provided for those purposes  
            shall fully reimburse the local agency that provided those  
            payments in the event that the employee or officer is  
            convicted of a crime involving the abuse of his or her office  
            or position.

          12)Defines "abuse of office or position" to mean either of the  
            following:

             a)   An abuse of public authority, including, but not limited  
               to, waste, fraud, and violation of the law under color of  
               authority; or,

             b)   A crime against public justice, as specified.
           
          FISCAL EFFECT  :   This bill is keyed fiscal.



           COMMENTS  :

          1)The Meyers-Milias-Brown Act governs labor-management  
            relations, although its bargaining and representation  
            procedures generally do not apply to executive employees.   
            Existing statutes restrict the compensation that can be  
            offered by local agencies to employees not covered by the  
            Meyers-Milias-Brown Act.








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            AB 1344 (Feuer and Alejo), Chapter 692, Statutes of 2011,  
            prohibited, starting on or after January 2, 2012, any contract  
            executed or renewed between a local agency and an employee  
            (those employees that are excluded from the  
            Meyers-Milias-Brown Act) from including an automatic renewal  
            of the contract if the contract provides for an automatic  
            increase in compensation that exceeds a cost-of-living  
            adjustment and a maximum cash settlement that exceeds the  
            amounts provided for in statutory provisions governing  
            employment contracts.  The bill also provided more public  
            review when a city is considering placing the adoption of a  
            charter before the voters and required local agencies'  
            governing boards to ratify their executive employees'  
            contracts of employment in an open session.  

            Finally, the bill required employment contracts to include  
            provisions limiting, upon termination, the maximum cash  
            settlement to be paid to no more than an amount equal to 18  
            months' salary.  If the executive's contract has less than a  
            year to run, then the amount can't exceed the remaining  
            expected salary.  Employment contracts also must include  
            provisions for the local agency to be reimbursed for any paid  
            leave salary and the cost of legal criminal defense funded by  
            the agency, if the officer or employee is convicted of a crime  
            involving an abuse of public office or position.

            According to the authors of AB 1344, the bill "was introduced  
            in response to the scandal surrounding the City of Bell in  
            2010 which exposed deficiencies in existing law that must be  
            addressed to ensure greater transparency and so voters have  
            confidence that taxpayer dollars are being used wisely."  AB  
            1344 targeted practices exploited by some local governments  
            that inappropriately (and sometimes extravagantly) rewarded  
            elected officials and top executive officers outside of public  
            view.  The bill aimed to require basic good governance  
            measures as they relate to compensation practices and  
            provided, to the maximum extent possible, the public with the  
            opportunity to be informed and comment on local  
            compensation-setting practices.

          2)This bill builds upon the provisions of AB 1344 and expands  
            the definition of several terms that were added into law by AB  
            1344.  The bill expands the definition of "local agency  
            executive" to include a deputy chief executive officer, or an  








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            assistant chief executive officer of the local agency and also  
            adds a person whose position within the local agency is held  
            by an employment contract between the local agency and that  
            person.

            This bill is sponsored by the California City Management  
            Foundation.

          3)According to the author, "This bill simply extends the  
            compensation restrictions and abuse of power provisions to all  
            local agency executives who work under an employment contract.  
             This expansion of the definition will include not only  
            department heads, such as city managers or county executives,  
            but will also include city managers, assistant county  
            executives, and any other employee who has an employment  
            contract with a local agency.  

            "SB 407 will prevent extravagant rewards to local agency  
            employees and reduce the liability of local governments to  
            provide paid leave and legal defense costs for employees who  
            are convicted of abuse of power charges."

           4)Support arguments  :  Supporters argue that this bill is a minor  
            expansion of legislation adopted last session to address abuse  
            of power practices and will assist in the prevention of  
            inappropriate and extravagant rewards to local agency  
            executives.

             Opposition arguments  :  None on file

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          California City Management Foundation [SPONSOR]
           
            Opposition 
           
          None on file

           
          Analysis Prepared by  :    Debbie Michel / L. GOV. / (916)  
          319-3958 










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