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Governor Signs Law to Require Agency Reports Before Approving Changes to Executive Compensation or Benefits

by on August 23, 2016

posted in Legislative Updates, Meetings, Uncategorised,

On August 23, 2016, Governor Brown signed SB 1436 (Bates), which mandates that local agencies report out certain information before changing the compensation or benefits of their “executives.”  Under this new law, legislative bodies (e.g., city councils, boards of supervisors, or boards of directors) for agencies must “orally report a summary of a recommendation” for changes in salaries or benefits before voting for the changes.  The votes must then take place in the open session portions of their meetings.

SB 1436 is part of an evolving trend toward requiring greater transparency concerning the compensation of high-ranking local officials following the City of Bell scandal.   Among the open-government measures that have been implemented previously, local agencies must now report their employee salaries to the State Controller and must abide by a number of limitations before changing the compensation and benefits of their high-ranking officers.

The following questions and answers are intended to provide a convenient reference for understanding and applying the new law.

What officers are subject to the new reporting requirement?

SB 1436 applies to “local agency executives,” which state law defines to include the chief executive officers of agencies (e.g., county administrative officers or city managers) as well as their assistants and deputies.   Department heads are also considered to be “executives” for purposes of the new law.

When does this law take effect?

SB 1436 takes effect on January 1, 2017.  The bill was not enacted as an urgency measure, so it is technically not applicable for the remainder of 2016.

How must agencies comply with the new reporting requirement?

SB 1436 requires agencies to “orally report” a “summary of a recommendation” concerning the change in salary or benefits.  Both these quoted terms are somewhat vague, but they are still capable of reasonable interpretation.

In my view, the requirement for an oral report means agencies must literally provide a verbal discussion about the change before voting on it.  This would appear to preclude voting on the matter on a “consent” agenda, where items are considered routine and voted on as a group, without discussion.  And this would also still require a verbal discussion of the proposed change even if—as is good practice—the recommendation is discussed in a written staff report.

What qualifies as a “summary of a recommendation” is less clear.  Does this term require an agency to prepare something formal to document the recommended change in salary or benefits?  In my view, the answer is, probably not.  A committee report for SB 1436 indicated the intent of that bill was to ensure that “executive compensation is at least mentioned, via an oral report of the recommended action,” before a change in salary or benefits is approved.  Essentially, the law appears to set the minimum an agency must do (providing an oral report) before approving the change.  Agencies can—and certainly should—do more, such as explaining and justifying a change in salary and benefits in written staff reports.

When must agencies provide the reports?

SB 1436 specifies that the summary of the recommendation must be made “during the open meeting in which the final action is to be taken.”  This means that the oral report must be made at the same meeting where the formal vote to approve a change in salary or benefits is taken.   If an agency discusses changes in salary or benefits over multiple meetings—which could happen, for instance, when agencies receive recommendations from committees in one meeting, and adopt their recommendations in a subsequent meeting—the oral report still must occur at the meeting in which formal approval occurs.

Note also that because of a change to the law in 2011, agencies may only approve changes in salary or benefits in regular meetings. Special meetings cannot be used for such approvals or, by extension, to make the newly mandated oral reports.

Does the new law affect agencies’ right to convene in closed sessions?

No.  SB 1346 does not alter agencies’ rights under the Brown Act to meet in closed session to give authority to those they appoint to negotiate with their high-ranking officers.  Instead, the new law requires that the formal approval of any change in salary or benefits be preceded by an oral, open-session report that explains the basis for the change.

What types of changes are subject to the new reporting requirement?

The new reporting requirement applies to changes in “salaries, salary schedules, or compensation paid in the form of fringe benefits.”  Essentially, all forms of employee compensation are subject to the new law’s requirements.

Questions about SB 1436 may be directed to the author of this article at (916) 780-9009 or dcole@cotalawfirm.com.

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tags: city of bell, closed session, executive compensation, open session, oral report, Public meetings, sb 1436,

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