United States: SEE YOU IN COURT! - July/August 2019

Last Updated: July 29 2019
Article by Thomas B. Mooney

The members of the Nutmeg Board are very concerned about whether and how they will make ends meet this year.  The Town slashed their budget request during the appropriation process, and as things stand at the beginning of the new fiscal year, they are looking at a deficit approaching $1,000,000.

Veteran Board member Bob Bombast warned his fellow Board members that they better do something and fast, and he promised to put on his thinking cap and to be back to his fellow Board members with some bright ideas.

Realizing that he had to think outside the box, Bob reached out to Bruno, President of the Nutmeg Union of Teachers (NUTS), and they met for coffee.  Bruno was sympathetic to Bob’s concerns about the projected deficit in the Board’s budget, explaining that he did not want the Board to have to lay off teachers to save money.

“I have talked with our Executive Committee, and NUTS has two great suggestions for the Board of Education to save money,” Bruno announced grandly.  “The first is an early retirement incentive program.  If we can work together to adopt such a plan, the Board can save a bundle.”

Bob was intrigued.  “Some of these teachers should have retired long ago.  Maybe we can get rid of some old deadwood and save money!  What do you propose?”

“We will keep it simple.  Teachers with twenty or more years of service will be able to participate in the plan, and upon retirement, they will receive a payment of $40,000.  After making those payments the Board will be even for the first year, and it will save for years to come on the cost difference between the teachers on the maximum step who retire and their replacements who are hired at the bottom of the scale!”

Bob liked the sound of that, though he was hoping for more immediate savings, and he asked Bruno if he had any other bright ideas.

“Of course!” Bruno responded.  “The Board can save money right now if it offers teachers money to waive health insurance, say $3,000 for a teacher on a single plan and $6,000 for a family plan.  Given that the cost of insurance is approaching $15,000 for an individual plan and $30,000 for a family plan, the Board will save a bundle whenever teachers take the waiver payment and get off the Board’s plan!”

Bob thanked Bruno for his creative suggestions, and Bruno then suggested that they lock in these savings by putting both the early retirement plan and the insurance waiver in the contract so that they would not have to revisit these issues every year.

“Done,” Bob responded.  Bob then emailed his fellow Board members, informing them that he would be asking Mr. Board Attorney to put together a little contract amendment to present to the Board for action.

What’s wrong with this picture?

*          *          *

Bob and the Board should read up on early retirement incentive plans.  While carefully-structured plans can reduce costs, the plan that Bob and Bruno came up with will certainly be costly to the Board.  The insurance waiver will be a loser as well.

In considering any early retirement incentive plan, the board must take into account the fact that teachers retire every year.  Therefore, the cost analysis must start by projecting how many teachers will retire in the normal course.  That number should be excluded from any calculation of savings, because these teachers would have retired anyway.  By contrast, the cost of any incentive paid to these teachers must be considered a cost of the plan.  In sum, the projected cost “savings” of an early retirement incentive plan must be computed based on the salary savings from the teachers retiring in excess of the average number, because only these teachers may be considered to have been incentivized to retire.  Moreover, those “savings” must then offset the costs of the incentives that are paid to all the teachers, including those who would have retired anyway.  Only when the “savings” from the retirement of the incentivized teachers have covered the costs of the incentive payment for all retiring teachers will there be savings from the plan.

In assessing the cost impact of a proposed early retirement incentive plan, boards of education must make accurate assumptions.  The board should not assume that it will be able to hire all replacement teachers at the first step, given the possibility that some teachers will retire from shortage areas; a more realistic estimate for the cost of the replacement teachers would be MA track, step 5.  The board must also decide how many teachers must retire under the plan in order to generate sufficient salary cost savings to justify the plan.  Perhaps most important, that number of teachers should be a “trigger” for the plan to go forward.  The board won’t know what the participation will be until the plan is offered.  Therefore, the plan should be expressly conditioned on the retirement of a specified number of teachers, and the board should reserve the right to withdraw the plan if that trigger number of retirements is not reached.

In any event, such plans should never be included in the collective bargaining agreement.  The premise of such plans is to incentivize teachers to retire earlier than they would without the plan.  If such plans are available through the contract year after year, the incentive is lost, and teachers will simply retire when they wish, albeit then with a going-away present.

While a carefully designed retirement incentive plan can save money, such is not the case with an insurance waiver plan.  Here, we must start with the premise that teachers (and other employees) will waive their insurance coverage only if they don’t need it.  When employee premium cost sharing was minimal, a waiver might have worked to induce an employer to move over to a spouse’s plan.  However, with employee cost-sharing approaching (and sometime exceeding) 20%, avoidance of the significant cost of insurance to the employee is incentive enough, and it is unlikely that paying the additional waiver amounts that Bruno suggested would induce any other employees to waive insurance.  Rather, such payments will simply be a new cost to the board.

Two points about the Nutmeg Board of Education may be helpful in closing.  As board members know, it is important not to do board business on email for fear of conducting an illegal meeting over email.  However, the definition of “meeting” under the FOIA excludes “strategy and negotiations with respect to collective bargaining.”  Therefore, email discussion of negotiation strategy will not be considered a meeting.

Finally, Bob should watch what he says.  Referring to some teachers as “old deadwood” may come back to haunt him if he is ever the subject of an age discrimination complaint.

Originally published by CABE Journal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions