DATE:
September 3, 2024
TO:
Chair/Mayor and Board/City Council Members
FROM:
Paul Buddenhagen, Executive Director/City Manager
SUBJECT:
MESA Employees One-Time Lump Sum Payments:
Resolution Of The Board Of Directors Of The Management Of Emeryville Services Authority (MESA) To Execute Side Letters Of Agreement With The Service Employees International Union Local (SEIU) 1021 And The Confidential, Administrative, Managerial And Professional (CAMP) Bargaining Groups And Authorize A One-Time Lump Sum Payment To Regular Full-Time MESA Employees Resolution Of The City Council Of The City Of Emeryville To Execute Side Letters Of Agreement With The Service Employees International Union Local (SEIU) 1021 And The Confidential, Administrative, Managerial And Professional (CAMP) Bargaining Groups And Authorize A One-Time Lump Sum Payment To Regular Full-Time MESA Employees Recommendation
Staff recommends that the Board of Directors of the Management of Emeryville Services Authority (MESA) and the City Council approve the attached resolutions authorizing a one-time lump sum payment to full-time regular employees of MESA.
Background
The Internal Revenue Service (IRS) conducted an audit of the Management of Emeryville Services Authority (MESA) and concluded that the City is the common law employer of MESA employees. The City/MESA agreed to a settlement and signed a closing agreement with the IRS on February 26, 2024. The agreement mandates that Social Security taxes apply to MESA employees’ wages.
Discussion
The City met with the two impacted bargaining groups of Service Employees International Union Local (SEIU) 1021 and Confidential, Administrative, Managerial And Professional (CAMP) and reached agreement as reflected in the side letters of agreement as follows:
The City made a one-time payment to the IRS, thereby absolving MESA employees of paying any Social Security taxes for years 2019-2021.
For tax years 2022-2023, and January 1 through February 26, 2024, the City is negotiating with the IRS to forgive or reduce Social Security taxes owed for those years. Irrespective of the outcome of those negotiations, the City will fully cover the back taxes due for 2022-2023, and January 1 through February 26, 2024, again absolving MESA employees of paying the employees’ share for that time period.
From February 27, 2024 and going forward, the City will require MESA employees represented by the Union to pay their share of Social Security taxes, as follows:
To comply with the IRS’ determination, the City will ensure that MESA employees’ compensation paid effective February 27, 2024 will be reported as Social Security wages and subject to the required Social Security tax on those wages. Payment of the employees’ share of that tax, which is six and two tenths per cent (6.2%) of wages per pay period, will be paid by the City for the period of February 27, 2024 through June 15, 2024. For this period only, employees will be responsible for paying the required federal and state withholding tax on the 6.2% employee contribution paid by the City.
Effective for the pay period beginning on June 16, 2024, bargaining unit employees will pay the 6.2% employee Social Security tax through a direct payroll deduction administered by the City.
In addition, for those regular full-time MESA employees employed by the City as of June 16, 2024, and who remain so employed through September 21, 2024, the City will provide each employee a one-time, non-pensionable lump sum payment of twenty-five hundred dollars ($2,500.00), to be paid by the City on September 27, 2024.
Fiscal Impact
The estimated cost of the lump sum payments is projected be $222,500 for 58 SEIU employees, 28 CAMP employees, and 3 unrepresented employees.
Staff Communication with the Public
Staff has had no communication with the public related to this action.
Conflict of Interest
None.
Conclusion
Staff recommends that the Board of Directors of MESA and the City Council approve the attached resolutions authorizing a one-time lump sum payment to full-time regular MESA employees.
PREPARED BY: Lilybell Nakamura, Human Resources Director Approved and Forwarded to the
Board of Directors of the Management of Emeryville Services Authority & City Council of the City of Emeryville:
Paul Buddenhagen, Executive Director/City Manager
Attachments
MESA Draft Resolution
Exhibit A – Side Letter of Agreement with the Service Employees International Union (SEIU) Local 1021 Exhibit B – Side Letter of Agreement with the Confidential, Administrative, Managerial and Professional (CAMP) City Council Draft Resolution
Exhibit A – Side Letter of Agreement with the Service Employees International Union (SEIU) Local 1021 Exhibit B – Side Letter of Agreement with the Confidential, Administrative, Managerial and Professional (CAMP) Side Letters of Agreement and Lump Sum Payments
MESA/City Council Meeting | September 3, 2024
City of Emeryville
CALIFORNIA
MEMORANDUM