Governor Brown Signs Legislation Placing a 12-Month Limit On Buyout Clauses In School Superintendent Contracts

September 2015
Number 52

This week, Governor Brown signed a new law (AB 215) that will prohibit school superintendent contracts executed on or after January 1, 2016 from providing more than twelve (12) months of severance pay if the superintendent’s contract is terminated without cause. In recent years, several costly superintendent buyouts have gained great notoriety, and AB 215 was introduced in response to those situations.

A cap on superintendent severance payments actually predated AB 215 and has been in existence for many years. For a local agency employee on an individual contract, existing law states that the maximum cash settlement allowed is his or her monthly salary through the end of the contract term and, if the unexpired term is greater than eighteen (18) months, the maximum settlement is eighteen (18) months of pay. For a school district employee on an individual contract, existing law also contains a limit of six (6) months pay for any cash or noncash settlement to a superintendent if the local agency employer believes, and subsequently confirms by an independent audit, that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices. Under existing law, the appropriateness of the settlement amount is determined by an administrative law judge after a hearing.

AB 215 restricts the discretion of school boards on these two matters for any superintendent contract signed on or after January 1, 2016. Thus, the new limit will apply to new contracts or to any existing contract amended after the start of the new year.

Under the new law, a school superintendent’s maximum cash settlement is limited to the lesser of: (a) the remainder of the superintendent’s contract or (b) an amount equal to twelve (12) months of salary. The new law expressly applies this limit to a district superintendent of schools and does not specifically reduce the 18-month limit for other employees with individual contracts (e.g., assistant superintendents, chief business officers). In practice, however, we expect that the new 12-month limit will be used for the superintendent’s subordinates as well. It should also be noted that the eighteen (18) month severance pay limitation is still applicable to non-school public agency employers.

AB 215 also now prohibits a local agency employer from providing any cash or noncash settlement to a school superintendent if the employer believes, and a subsequent independent audit confirms, that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices. AB 215 removes the existing pre-judicial administrative appeal process for the employer’s determination.

Employers should note that existing law also prohibits a public employer from agreeing to a settlement that continues an employee’s health benefits beyond the term of the settlement, or until the employee finds other employment, whichever is first. Under AB 215, a one-year period will now be the maximum time allowed for this extension of health benefits to a school superintendent who is terminated without cause under a contract signed on or after January 1, 2016.

AB 215 was opposed by several groups on the contention that it will further inhibit the ability for school boards to recruit highly qualified superintendent candidates. These groups further asserted that the higher cost of buyouts actually discouraged the practice, and that the lower cost will lead to an increase in buyouts and administrative turnover without a significant cost savings. Notwithstanding these arguments, AB 215 is now law and will apply to any superintendent contract signed on or after January 1, 2016.

For further information about AB 215 case and superintendent contracts, please contact one of our nine offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.

Written By

Darren C. Kameya
Partner
Los Angeles Office
dkameya@lozanosmith.com

©2015 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

 

New Bill Makes Significant Revisions to Prequalification, Lease-Leaseback, and Lease-to-Own Statutes

September 2015
Number 51

In a year when lease-leaseback agreements have been a hot topic, a new bill makes prequalification mandatory for all lease-leaseback and lease-to-own agreements by school districts having more than 2,500 average daily attendance (ADA), and makes other significant changes to school construction law.

Commencing in 2012, Public Contract Code section 20111.6 made prequalification mandatory for school district public projects where three criteria were met: (1) a projected expenditure of at least $1,000,000; (2) ADA in the school district of at least 2,500; and (3) the use of state bond funds. In 2014, Assembly Bill (AB) 1581 expanded the application of this mandatory prequalification requirement to “lease-leaseback” (where construction will occur on land owned by the school district) and “lease-to-own” (where construction will occur on land not yet owned by the school district) under Education Code sections 17406 and 17407, respectively. Governor Jerry Brown has now signed AB 566, which further revises these statutes in three important ways. AB 566 becomes effective January 1, 2016.

AB 566 expands the above prequalification criteria to include projects where state funds will be requested in the future. PCC section 20111.6 was not clear as to whether prequalification would be required where a school district uses local funds during the project, but after construction seeks reimbursement from future state bonds. The new bill clarifies that prequalification is required if the District anticipates seeking state funds in the future.

AB 566 expands the requirement of prequalification to most lease-leaseback and lease-to-own arrangements under Education Code sections 17406 and 17407. Both statutes currently state that if the lease-leaseback instrument or lease-to-own agreement uses state bond funds and $1,000,000 or more will be expended on the project, then the instrument or agreement shall require that the contractor and its mechanical, electrical, and plumbing (MEP) subcontractors are subject to prequalification under Public Contract Code section 20111.6.

Going forward under AB 566, prequalification for lease-leaseback and lease-to-own construction will be required regardless of the funding source and regardless of the cost of the project. Even if a school district is not going to use or request funds from state bonds, and even if the project will be valued at less than $1,000,000, the district must still use prequalification under PCC section 20111.6 for lease-leaseback and lease-to-own construction. However, districts with ADA under 2,500 remain exempt from prequalification requirements.

AB 566 imposes significant labor requirements on lease-leaseback and lease-to-own arrangements. These requirements are often addressed in project labor agreements between public agencies and trade unions. AB 566 adds Education Code section 17407.5, which prohibits a lease-leaseback instrument or lease-to-own agreement unless the contracting entity provides to the school district an “enforceable commitment” that the contractor and its subcontractors will use “a skilled and trained workforce to perform all work … that falls within an apprenticeable occupation.” The statute provides detailed definitions for “skilled and trained workforce,” “apprenticeable occupation,” and other key terms.

The contractor may make an enforceable commitment in one of three ways: (a) Stating in the agreement that it, and its subcontractors, will comply with the statute, and that the contractor will submit monthly reports; (b) agreeing that it will become a party to the school district’s project labor agreement for the project that binds all contractors and subcontractors to the terms of the statute; or (c) having previously entered a project labor agreement that binds all contractors and subcontractors to the terms of the statute. If a contractor agrees to submit monthly reports but it fails to do so, the school district must immediately cease payment to the contractor.

Lozano Smith regularly updates prequalification materials and construction documents to comply with changes in the law. To obtain the most up-to-date materials, or if you have any questions regarding prequalification or the lease-leaseback or lease-to-own delivery methods, please contact one of our nine offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.

Written By

Devon B. Lincoln
Partner
Monterey Office
dlincoln@lozanosmith.com

Arne Sandberg
Senior Counsel
Walnut Creek Office
asandberg@lozanosmith.com

©2015 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

Court Upholds School District Decision Where to Locate Charter School

September 2015
Number 50

In Westchester Secondary Charter School v. Los Angeles Unified School District et al., (2015) 237 Cal.App.4th 1226 (Westchester), the court of appeal affirmed that when a charter school makes a facilities request under Proposition 39, the charter school is not entitled to a specific location of its choosing. Instead, a school district need only make reasonable efforts to place a charter school near the charter school’s desired location. This was a closely watched case as the California Charter Schools Association filed an amicus brief in support of the charter school.

Under the Education Code, a charter school may request facilities from the school district in which it operates and the district is obligated to “make reasonable efforts to provide the charter school with facilities near to where the charter school wishes to locate.” (Ed. Code § 47614(b).) The facilities request process occurs over several months and involves various steps, including a charter school’s initial written request, a school district’s preliminary proposal, a charter’s response to the proposal, and a school district’s final notification of the space offered. (Cal. Code. Regs., tit. 5, § 11969.9(g)-(h).)

In November 2013, Westchester Secondary Charter School (WSCS) submitted a facilities request to the Los Angeles Unified School District (LAUSD) for the 2014-2015 school year. The request noted that the charter school preferred a site located in Westchester, and listed nine school sites in order of preference. However, the site that the district offered to WSCS was not one of the nine sites listed in the charter school’s facilities request. Instead, LAUSD offered the charter school facilities at a site located in Crenshaw-6.4 miles from the charter school’s first desired school site and 7.4 miles from its second desired school site.

At trial, the charter school alleged that LAUSD had failed to make reasonable efforts to place the school near its desired location. The trial court disagreed and the court of appeal affirmed, concluding that the charter school’s facilities request stated that the school would consider facilities “reasonably close” to Westchester, the school’s desired neighborhood, and that the district had timely offered WSCS a school site only 2.53 miles from the boundary of the Westchester neighborhood. The court of appeal further noted that previous cases had determined that greater distances were “near” a desired location. The court of appeal held that the relevant consideration was the distance from the offered facilities to the requested geographic area (e.g. the Westchester neighborhood), not the distance to the requested school site.

Westchester indicates that a school district is still given discretion over the assignment of its facilities. The court of appeal ruled that LAUSD had not abused its discretion in making its offer to WSCS because the school district had a reasonable basis for its decision. LAUSD conducted a “comprehensive capacity assessment of each school” to determine space availability. Additionally, LAUSD demonstrated that placing the charter school at the charter’s first-choice site would cause safety, educational, scheduling and operational challenges among the eight existing programs at that site. Moreover, an alternate site WSCS had requested was not “reasonably equivalent” as that site did not serve the same grade levels as WSCS. (Ed. Code § 47614(b); Cal. Code Regs., tit. 5, § 11969.1(b).)

As Westchester demonstrates, a school district that offers facilities to a charter school must make reasonable efforts to locate the charter school near its desired location. However, “desired location” does not mean “exact location.” When making facilities offers, a school district should consider the “reasonable efforts” it can make in light of Westchester including: timely responding to a charter school, assessing space availability, explaining why a charter school was placed at one site over another, attempting to minimize the distance between the site(s) offered to the extent reasonable, the geographic area stated in the facilities request, and determining how your school district’s policies may impact facilities request offers.

If you have any questions regarding the Westchester decision or about charter school issues in general, please contact one of our nine offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.

Written By

Edward Sklar
Partner
Walnut Creek Office
esklar@lozanosmith.com

Elí S. Contreras
Associate
Monterey Office
econtreras@lozanosmith.com

©2015 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

New Changes to Paid Sick Leave Law Effective Immediately

September 2015
Number 49

On July 13, 2015, Governor Brown signed Assembly Bill (AB) 304 into law, which clarifies the provisions of the Healthy Workplaces, Healthy Families Act of 2014 (Act), also known as AB 1522 or the “paid sick leave law.” The Act expanded the right to paid sick leave to cover many more part-time employees in California. AB 304 clarifies portions of the Act and adds new options for compliance with the requirements of the Act. AB 304 was passed as an urgency measure and its provisions are effective immediately. Employers should ensure that their policies comply with AB 304.

The main changes to the Act made by AB 304 include:

  • Exclusion for Some Retirees. The Act, as amended by AB 304, excludes specified retirees from the definition of “employee.” This means that specified retirees are not entitled to paid sick leave benefits under the Act. The Act now provides that the term “employee” does not include a public employee who receives a retirement allowance and is employed without reinstatement into his or her respective retirement system under the Public Employees’ Retirement System (CalPERS) or the County Employees Retirement Law of 1937. This new exclusion does not apply to the California State Teachers Retirement System (CalSTRS).
  • Alternative Accrual Methods. Previously, the Act required that employees accrue at least one hour of paid sick leave for every 30 hours worked. In addition to this option, Labor Code section 246 now also allows employers to use the following accrual methods:
    • An employer may use a different accrual method “provided that the accrual is on a regular basis so that an employee has no less than 24 hours of accrued sick leave or paid time off by the 120th calendar day of employment or each calendar year, or in each 12-month period.”
    • An employer may provide not less than “24 hours or three days of paid sick leave that is available to the employee to use by the completion of his or her 120th calendar day of employment.”

While now a part of the Act, employers should use caution in applying these alternative accrual methods and be mindful that the Labor Commissioner may provide further clarification regarding their use.

  • “Grandfather Clause” for Paid Leave Policies. An employer is not required to provide additional paid sick days if, prior to January 1, 2015, the employer provided a paid sick leave policy or paid time off (PTO) policy, that meets specified requirements, to a class of employees and the leave may be used for the same purposes and under the same conditions as specified in the Act. Under this option, the Act now allows these policies to continue for both current and new employees in the class covered by such policies if the policy: 1) provides at least one day or eight hours of paid sick leave or PTO within three months of employment of each calendar year, or each 12-month period; and 2) the employee was eligible to earn at least three days or 24 hours of paid sick leave or PTO within nine months of employment.

If the employer changes the accrual method used in the grandfathered paid sick leave or PTO policy it had in place, the policy will lose its grandfathered status and the Act’s accrual requirements will apply.

The applicability of this “grandfather clause” will depend on the policy the employer had in place prior to January 1, 2015. We recommend employers work with legal counsel to determine whether the “grandfather clause” applies to a pre-existing paid sick leave or PTO policy.

  • Alternative Method for Calculating Rate of Pay. The Act, as amended by AB 304, now provides two options for calculating the rate of pay for paid sick leave for nonexempt employees. The employer may either:
    • Calculate paid sick time in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time; or
    • Calculate paid sick time by dividing the employee’s total wages, not including overtime pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.
  • No Requirement to Reinstate Paid Sick Leave if Paid Out at Separation. AB 304 clarifies that an employer is not required to reinstate the paid time off that the employer paid at the time of termination, separation, or resignation of employment.

AB 304 addresses several of the questions that employers had raised as they worked to implement the Act. However, there are still a number of uncertainties regarding the Act’s interpretation. If you have questions about how this legislation will affect any of your employee groups or classifications, please contact one of our nine offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.

Written By

Darren C. Kameya
Partner
Los Angeles Office
dkameya@lozanosmith.com

Desiree Serrano
Associate
Los Angeles Office
dserrano@lozanosmith.com

©2015 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.