State Pensions

January 17, 2013

Some CalPERS managers given second jobs, extra money

For nearly two years, managers earning fixed salaries at California's massive public retirement system have been making extra money at second hourly-wage jobs at the agency.

For nearly two years, managers earning fixed salaries at California's massive public retirement system have been making extra money at second hourly-wage jobs at the agency.

CalPERS officials say bestowing "additional appointments" on managers unable to earn overtime is a legal and "relatively common practice" in other state departments. They said they resorted to the system because they were coping with a crushing workload to launch a new computer system and it was asking too much of managers to work long hours without additional pay.

But state personnel experts contacted by The Bee say they've never heard of managers taking hourly positions in their own department. The practice, they said, may violate federal labor law.

At the very least, said former state personnel director Dave Gilb, it circumvents the state's intent to set fixed wages for salaried management jobs.

"It's giving more money to people who are not eligible for overtime," Gilb said. "It's not right."

Sacramento-based labor attorney Tim Yeung, who also worked in the state's personnel department, said he'd never heard of managers also taking hourly pay for work within their department.

CalPERS spokesman Brad Pacheco said the fund used the system to combat crushing workloads and backlogs created by glitches in its 17-month-old computer system, dubbed my|CalPERS. The practice began in June 2011 and is expected to continue at least until this July.

Fund officials say they don't believe they've broken any labor laws. Managers got a crack at the second jobs only after rank-and-file overtime options were exhausted and project managers decided to reject more expensive alternatives, such as contracting outside consultants.

"We feel it was a prudent thing to do," Pacheco said.

Still, after The Bee began asking questions about the double appointments, CalPERS human resources chief Katrina Hagen on Monday asked two high-level state personnel officials to talk over the double appointments.

As in the private sector, state government managers control their own schedules, can receive a full day's credit for a partial day worked and don't fill out a time sheet for their hours on the job.

The honor system comes with a condition: Managers must work more than 40 hours in a given week if that's what the job requires. Unlike rank-and-file employees, state managers don't receive overtime pay. Instead, they're supposed to take paid time off when their workload lightens.

"Salaried employees are able to work as many hours as necessary until the job gets done," Gilb said. "Even if the work is in other areas."

It's not clear exactly how many CalPERS managers have taken a second job with the department. CalPERS provided cost figures for one month, November 2012, saying those were the latest numbers readily available.

Pacheco referred The Bee to the California Department of Human Resources, which he said could compile more data. That department, in turn, referred The Bee to the State Controller's Office, which runs the government's payroll system.

The Controller's Office on Wednesday said it was still compiling the additional appointment pay data.

According to Pacheco, CalPERS paid $45,000 in November to a total 50 managers, an average $900 each. It paid the wages at the rank-and-file job overtime rate, time and a half. The money doesn't count toward pension calculations, the fund said.

A 27-year-old section in a rarely referenced state personnel manual allows employees to take additional appointments, but it specifically says hourly employees are eligible. It doesn't mention salaried employees.

CalPERS also used a bonus system to pay some employees for extra work, much like private-sector employers pay managers for above-and-beyond duty.

Known as "arduous pay," employees who aren't overtime-eligible can receive a flat $300-per-week bonus of up to $1,200 per month for up to four months in a fiscal year.

The criteria for arduous pay include exceptionally demanding, time-consuming work performed under a crushing deadline or extreme emergency to relieve an exceptionally heavy workload that is unavoidable.

State labor negotiators, for example, have earned the bonus during round-the-clock collective bargaining talks, Gilb said.

CalPERS did not provide specifics on how many managers received the arduous pay differential or how much it cost.

What's clear is that CalPERS was under intense pressure to get its computer system running when it started giving managers additional hourly jobs nearly two years ago.

The my|CalPERS system aimed to seamlessly replace a patchwork of archaic software and hardware with a unifying Internet-based system. It launched in September 2011, nearly two years late, and at $514 million cost twice its original estimate.

It immediately ran into a series of embarrassing glitches, such as delaying benefit checks and wrongly triggering health insurance cancellation letters to grieving widows.

The problems compounded. Angry, confused and worried members swamped the fund's customer service center.

Pacheco said CalPERS needed all hands on deck to fix various problems but had few options.

Relatively cheap labor such as retired annuitants and students couldn't do the work. Managers offered rank-and-file employees overtime. When that pool of volunteers started to dry up, CalPERS ordered staff to work overtime.

"Staff who have already done overtime, at some point they get burned out," Pacheco said, and CalPERS wasn't eager to throw more money at outside consultants.

That's when the fund turned to salaried managers whose career history included the kind of experience the fund needed to handle its growing information technology and customer service workloads.

"You have a project like we did, and it was tied to certain schedules," Pacheco said. "We utilized everything in our ability to get the work done."

Gilb and Yeung, the labor lawyer, suggested the dual appointments could expose CalPERS to lawsuits.

If a judge decided that the salaried manager received hourly wages and the second position wasn't outside the scope of his or her job, a court could strip the position of its exempt status and order CalPERS to issue back pay for any overtime the salaried manager worked, said Yeung, the labor attorney.

If the manager wasn't paid at time-and-one-half the hourly equivalent of their salary when they worked more than 40 hours in a given week, a judge could decide CalPERS also violated federal labor law that requires overtime paid at a higher rate than straight time.

"It could get expensive for CalPERS very quickly," Yeung said, obligating the fund to retroactively pay the affected employees multiple damage penalties and to cover attorney fees.

The CalPERS rank-and-file workers doing jobs similar to those performed by the managers are represented by SEIU Local 1000. Union officials declined to comment.

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