Title
Report regarding a resolution approving a side letter agreement amending Article 4 of the Memorandum of Understanding between the City and AFSCME Local 829 (Leah Lockhart, Human Resources Director)
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RECOMMENDATION
Recommendation
Approve a resolution approving the Side Letter Agreement amending Article 4 of the Memorandum of Understanding between the City and AFSCME Local 829 regarding Communications Dispatcher educational incentive pay and compliance with the California Public Employee’s Retirement Law (PERL).
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BACKGROUND/DISCUSSION
The City contracts with the California Public Employees’ Retirement System (CalPERS) to provide for a pension program for all full-time regular employees, including employees represented by the American Federation of State, County and Municipal Employees (AFSCME) Local 829. CalPERS provides pension and health benefits for more than 1.5 million California public employees. Retirement benefits are calculated based on years of service, age at retirement, and final compensation. CalPERS conducts periodic audits to ensure compliance with reporting special compensation as defined by the California Public Employees’ Retirement Law (PERL).
In December 2025 the City was notified that the education incentive component of the Communications Dispatcher compensation plan, as described in Article 4 the Memorandum of Understanding (“MOU”) between the City and AFSCME, must be excluded from reportable compensation, as the City’s policy did not comply with PERL regarding special compensation (C.C.R. §571 and 571.1). The current MOU provides that Communications Dispatchers may receive an incentive of 2.5% of salary for an Associate degree or 60 accredited units.
Although the MOU provision regarding education incentive has been in place for over twenty years and has not previously been excluded by CalPERS, on October 16, 2025, CalPERS issued a circular letter clarifying requirements for education incentive pay and these requirements are now being strictly enforced. CalPERS representatives recommended the following changes to the education to make it compliant with PERL:
1. Specify that the education must enhance the employee’s ability to do their job. Currently, the MOU states that the degree or education credits may be in any field, which does not comport with the PERL requirement that the education must relate to the employee’s job responsibilities.
2. Remove two-year service requirement. Under PERL, education incentive must be available to all employees within a valid group or class of employment and cannot contain additional stipulations such as a service requirement. CalPERS advised that a requirement to have passed a probation period is acceptable, as this is a clearly defined change in employment status. AFSCME employees serve a probation period of a minimum of twelve (12) months, which may be extended up to eighteen (18) months.
3. State that a formal application and review process will be implemented. Currently, the City’s process includes review and approval by the Police Chief and the Human Resources Director, however this is not stated in the MOU. Upon the execution of the side letter, the City will document the review process and implement review guidelines in accordance with CalPERS requirements.
Upon receiving this guidance, Human Resources staff drafted a proposed side letter of agreement which closely follows the guidance provided by CalPERS representatives and presented this proposal to AFSCME local 829. The parties tentatively agreed to the proposed changes, contingent upon City Council approval, to maintain the current benefit while addressing issues related to CalPERS reportability.
Staff is currently reviewing all labor agreements and compensation plans for potential compliance-related issues related to the recent CalPERS guidance on education incentive pay. If necessary, staff will meet with other bargaining unit representatives to discuss similar MOU provision amendments to comply with PERL for special compensation reporting.
FISCAL IMPACT
Staff reviewed the eligible employees under the education incentive plan and determined that the proposed changes would not increase compensation for employees currently receiving and would not create any newly eligible recipients during the time period of July 1, 2025 to present.
RELATIONSHIP TO FY 2025-26 ACTION PLAN
This action supports the modern and sustainable organization major focus area by ensuring that the City maintains competitive compensation package through collective bargaining agreements to recruit and retain qualified staff, while ensuring compliance for the purpose of CalPERS pension compensation reporting.
CONCLUSION
Staff recommends that the City Council adopt a resolution approving the Side letter agreement to amend the MOU between the City and AFSCME Local 829 to maintain collectively bargained compensation provision for Communications Dispatchers while complying with CalPERS requirements regarding reportable special compensation.
ASSOCIATED DOCUMENTS
Resolution 26-1504