Molly Janczyk, Day 2 of Board Retreat: Severance and Legal Fees

From Molly Janczyk, February 1, 2008
Subject: Severance and Legal Fees: Retreat: Day 2: Thurs. 1/31/08

Mary Ellen Angeletti provided you with phenomenal minutes of the entire day. I am simply going to address Severance and Legal Fees in a discussion manner.

SEVERANCE:

Presenter: STRS Human Resources Director: Andy Marfurt Leader in discussions: STRS ITS: Greg Taylor

Leone: How was money saved providing severance to laid off workers if it was planned?

Ans.: STRS reduced staff ahead of schedule. IT market was not as good as expected. Some thru attrition, some laid off.

STRS has approved Retention Severance.
(Damon: No objection when presented to Board until after the severance was paid).

Leone: We weren't told of all the inclusions.

STRS Staff: Retention severance if offered as an inducement for staff to stay until the end of a project: Typical length of time may vary from 6-16 yrs. This helps keep staff till the project is completed vs. their going out looking for other jobs knowing their position at STRS will be terminated at end of project for which hired.

Employees know their job will end and we decided on this incentive as is common in the workplace. We looked at what is typical and some companies offer incentives of 50-100% of salary for severance packages. Retention severance is less expensive than retention inducement. We offer a reasonable less expensive retention severance at 1/2 cost of some packages.

Without severance, workers seek employment stability elsewhere and if we have 5-10 or more leave prior to project completion, STRS cannot afford the reduced productivity, etc.

Severance keeps STRS out of law suits. ALL workers must sign the severance agreement stating they will not sue STRS in order to receive the package. If such staff is part of a protected class such as age, discrimination, etc., they can sue for wrongful termination if there were no signed severance agreement. A said worker who has been at STRS for 6 yrs. may be terminated over a worker there for 3 yrs. and state it is wrongful: WHY THEM?

Andy said he had been involved in 100's of lawsuits prior to severance and since severance agreements, they have been 0.

Lazares stated all must be terminated legally and if this type of severance was standard. Yes, he was told. We are at the very low end of severance packages as some have severance for 2 months work.

Why don't the other pension systems have severance? STRS is considered cutting edge and the other systems do not lay off, reduce staff as STRS does.

Lazares pointed out several times, not to be argumentative but to explain, that educators have no knowledge of such procedures receiving 0 if fired and STRS must understand this.

Meuser, Cervantes and Ramser talked of advance knowledge for educators knowing in April each year if they are renewed.

Meuser: Educators' severance is sick leave up to a certain cap.

Lazares continued with educators can be laid off anytime with 0. I have a Board member who had 29 yrs and was laid off and couldn't find a job due to his senority. Educators are hurt by senority where private business values it.

Ramser: Severance is not a benefit but part of the litigation strategy to motivate workers to stay and prevent wrongful litigation. It protects our assets.

Meuser: This is a business not a school.

Andy: It protects our system data.

Greg: I talked to Board about reducing staff and need for severance. Damon confirmed pre-serverance info sent to the Board and they were asked if any objections. Then, Greg met with workers beginning 7/20 and they started signing agreements. Severance paid 8/1/07.

Leone: Not about HC, part time workers and cash for unused sick/vac days.

Damon: Health care benefits are only continued during severance period. Sick and vacation is a check issues but does not accrue during severance period. Part-time employees pay 30-50% of their premiums.

Lazares required knowing in advance WHO was being terminated before he would agree.

Ramser felt she didn't need to know each person-just how it impacts the system; supposed to be long term thinkers; question why very short term workers needed-not planned well enough?; Severance is for terminating to save money and protect assets.

Lazares: shouldn't we know about people which is the most important asset and that not threatened by the system and anything to do with money is our business.

Lazares questioned WHY staff wanted one person: a new Exec Direc. to have the power to terminate and may have a prejudice against a worker over a Board of 11 which would be safer for them. (My point all along)

Mary Ann Cervantes: We WILL be notified of any variance.

Leone: The Exec.Direc. can do as he wants.

Option 1 states that the :

'Board approves the Severance Policy. The Exec. Direc. is authorized to offer severance, pursuant to policy for future reductions in force without requiring Board approval: Procedure would be:

...• Human Resources, Dept. Head, Exec Direc. review proposed reductions and

...• Exec. Direc. provide BOARD the information in Exec. Session

...• Reduction takes place in compliance with approved policy'

Bill Neville (STRS Legal Head) said IF something seemed wrong in what was provided to the Board (Lazares' requirement), a motion could be made at that time.

Option 2 needed Board approval for each termination case.

Tai asked to reframe option 1 and option 2.

Craig Brooks summarized each option succinctly to move ahead with a vote.

The Board approved Option 1 with Brooks, Puckett (needs to be Board approved with Exec Direc and Board working together) and Leone voting no and wishing for Board approval in each case.

LEGAL FEES:

Ramser: I voted no due to last sentence in original sentence: Unless otherwise required by law, no associate legal fees will be paid without Board approval. Now it is written to my satisfaction and so, I call for a vote.

New Proposed Legal Fee Policy:

"If an STRS 'requests' (changed from 'required' due to appearance that STRS staff required to seek counsel: Leone wished change provided by Dave Parshall : CORE pres.) legal representation for matters arising due to his or her employment by STRS Oh., the associate shall first request assistance from the General Counsel (STRS Legal Head: Bill Neville). In the event the STRS Ohio Legal Dept. 'will not' (changed from unable: Leone: you are always able) provide representation, the associate shall seek representation from the Ohio Attorney General pursuant to ORC Section 109.361. Unless otherwise required by law, in no event will STRS Ohio pay fees for attorneys retained outside this process without Board approval.

Lazares was the motivator to settle this issue. He asked what words would it take to settle as we are so close? (In Mooney style!) That is when the determined words were changed and the amended policy approved!