Administrative Bulletin No.
2002-1
Subject: Termination Payments in
Collective Bargaining Agreements
To: Chief School
Administrators
Date: January 2002
College and University Presidents
Termination payments are a common element of compensation negotiated
between school districts and collective bargaining units. Typically, a collective
bargaining agreement between a school district and its teachers, administrators or
supervisors will contain a leave provision which provides for payment(s) to an employee
upon the employee's resignation or retirement from the school district if the employee
meets certain specified terms or conditions. Under certain circumstances, such payments may
be reportable to the System as "termination pay" and, therefore, includable in a member's
five-year final average salary, if applicable, in the case of System members with a
membership date prior to June 17, 1971. Such payments may be reportable if:
-
The payment is available to everyone covered by the agreement;
and
-
The criteria for receipt of the payment is impartial, objective, and
ascertainable from the agreement itself.
Circumstances under which such payments would not be reportable to
the System are as follows:
-
Payments made outside the terms of the
agreement. Where payment under the agreement is contingent upon the
satisfaction of conditions, the employee must meet all of the terms and requirements
provided in the agreement in order for the payment to be reportable to the System. In
other words, if the agreement states the employee must have achieved a certain number
of years of service with the school district in order to qualify for a termination
payment, and the employee does not have the requisite number of years of service, the
payment will not be reportable to the System. Thus, should a school district
"waive" a term or condition for receiving the payment in order that a non-qualifying
employee may receive the payment, the payment will not be reportable to the System
unless the school district's board has adopted an unconditional resolution or entered
into a contract amendment waiving the term or condition as to all
members of the bargaining unit.
-
Payments made pursuant to "discretionary" provisions contained
in an agreement. Termination payments payable "at the discretion of the school
district" or with no qualifying terms or conditions and no objective formula for
determining the amount of such payments will not be reportable to the System. The
discretionary aspect of these payments give rise to the inference that the payments are
intended solely as an inducement to resign or retire, rather than previously
established compensation for service.
-
Payments made in exchange for an employee's
resignation. A typical condition for the receipt of a termination payment
requires the employee to resign by a certain specified date. Payments under such
provisions are not reportable unless the notification requirement is purely for
administrative planning purposes and not designed to induce an employee's resignation
or artificially inflate the employee's final average salary. In addition, the
payment(s) must be part of a comprehensively negotiated collective bargaining agreement
and uniformly available to all employees in the bargaining unit who meet specified age
and service requirements. Payments negotiated on the eve of retirement
requiring resignation within a certain window of time, or subject to terms and
conditions restricting coverage to only a relative few retirement-eligible employees
are not reportable.
Please be advised the fact that payments to obtain resignation are not
reportable to the System (and, therefore, not includable in the five-year final average
salary) does not render the payment illegal or prohibited. Such payments, while not
reportable, may be within the employer's power to make various types of payments to their
employees so long as they do not otherwise offend the Taylor Law or other applicable
law.
|
