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Item 9B MemoCity of Southlake, Texas MEMORANDUM July 10, 2003 TO: Billy Campbell, City Manager FROM: Kevin Hugman, Director of Human Resources SUBJECT: Resolution No. 03 -043, Amending City of Southlake personnel policies regarding employee benefits, including vacation, compensatory time, and sick leave benefits; and implementing a one -time monetary reduction of employee's accrued vacation and compensatory leave. Action Requested: City Council approval of Resolution No. 03 -043, amending the personnel policies to implement a cap on accruals on vacation, compensatory time and sick leave accruals; and authorizing the City Manager to compensate employees on a one -time basis to reduce accrued leave balances to levels below the limits as amended by the proposed policy revisions. Background Information: Through the years, City employees have accrued many hours of unused vacation leave and compensatory time. These accrued paid leave balances have created a significant financial liability for the City because the monetary value of the accrued paid leave balance must be accounted for in the General Fund balance. The total financial liability has continued to grow due to (1) no existing enforceable limits on leave balance accruals, and (2) the increase in employee wage rates over time which increases the dollar value of each hour of earned leave. In addition, the purpose of vacation and compensatory time off in allowing an employee to "recharge" is defeated when employees do not use their paid time off Staff conducted surveys of 14 area cities to determine a fair method of limiting the City's financial liability due to unlimited paid leave accruals, while also considering the needs of employees and the various work units. The following are highlights of the proposed policy revisions to Chapter 4 "Wage and Salary Administration" and Chapter 6 "Employee Benefits:" • Accrual of compensatory time in lieu of wages for overtime hours worked, will be capped at 48 hours for all employees. All other overtime will be paid in wages. • Vacation leave accruals will be capped at 240 hours for regular employees, and 360 hours for fire shift personnel (who accrue and use leave at a higher rate since they are on 24 -hour shifts). Accruals of vacation leave will cease when an employee reaches the specified limit. • Sick leave accruals will be capped at 720 hours and will cease to accrue when an employee reaches those limits. Resolution No. 03 -043 will allow those employees with sick leave balances in excess of 720 hours to retain the difference, but to cease accruals until such time as their sick leave balance is reduced below 720 hours. Billy Campbell, City Manager July 10, 2003 Page 2 • Continues current policy of payment of accrued sick leave, up to 400 hours, upon separation from City with 20 years of service or more, but now includes exception for involuntary termination. • Added restrictions for death -in- family leave, court leave and military leave benefits. • Included modifications to Employee Benefits section to reflect Family Medical Leave Act (FMLA) policy. Financial Considerations: The proposed policy will allow the City to control its financial liability due to accrued paid leave balances by restricting the balances allowed. Resolution No. 03 -043 also authorizes a one -time buy back of accrued vacation leave and authorizes buy back of compensatory time. The estimated cost of buy -back for accrued vacation leave is $300,000 to $500,000, depending on the amount of vacation leave sold back by employees (selling back to maximum or minimum balances). Accrued compensatory time is approximately $150,000. The General Fund balance includes the total financial liability of all accrued paid leave, therefore, funds exist in the General Fund to allow the buy -back provision of Resolution No. 03 -043. The buy -back will significantly reduce the current financial liability, and the proposed policy revisions will ensure the future liability does not reach current proportions. Citizen Input/ Board Review: Not Applicable. Legal Review: The City Attorney has reviewed the policy. Alternatives: Input as desired by Council. Supporting Documents: • Resolution No. 03 -043, Amending City of Southlake personnel policies regarding employee benefits, including vacation, compensatory time, and sick leave benefits; and implementing a one -time monetary reduction of employee's accrued vacation and compensatory leave. • Chapter 4 "Wage and Salary Administration" (underline /strike - through with changes). • Chapter 6 "Employee Benefits" (underline /strike - through with changes). Staff Recommendation: City Council approval of Resolution No. 03 -043, amending the personnel policies to implement a cap on accruals on vacation, compensatory time and sick leave accruals; and authorizing the City Manager to compensate employees on a one -time basis to reduce accrued leave balances to levels below the limits as amended by the proposed policy revisions.