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03-05-2019 - AGENDA ITEM 06 DEPARTMENT HEAD CONTRACT SURVEYAGENDA ITEM NO. 6 AGENDA STAFF REPORT City of West Covina I Office of the City Manager DATE: March 5, 2019 TO: Mayor and City Council FROM: Chris Freeland City Manager SUBJECT: DEPARTMENT HEAD CONTRACT SURVEY RECOMMENDATION: It is recommended that the City Council institute a process where the City Manager provides courtesy notice to the City Council prior to making an employment offer to any new Department Head. DISCUSSION: At the December 18, 2018 City Council Meeting, Councilman Dario Castellanos requested a survey of other cities to gauge the practice of having Department Heads enter into individual employment contracts similar to the practice used for employing City Managers. Staff surveyed 38 cities throughout the greater Los Angeles and Orange County areas and found the following: Eleven (11) cities require Department Heads to enter into employment contracts. The cities that fall into this category are listed below: • Azusa • Baldwin Park • El Monte • Glendora • Huntington Beach • Irwindale • Montebello • Pasadena • San Marino • Seal Beach • South El Monte There are unique practices for hiring Department Heads that must be noted. For example, the City of Monterey Park only requires its Police Chief and Public Works Director to enter into employment contracts, the City of Torrance's City Council maintains the appointing authority over the Finance Director position, and the City of Baldwin Parks City Council selects its Department Heads and approves their employment contracts. Several cities also vest the appointing authority over the non -elected City Clerk's position with their respective city councils. Twenty-seven (27) cities do not require Department Heads to enter into employment contracts. The cities that fall into this category are listed below: • Alhambra • Industry • San Dimas • Arcadia • Irvine • San Gabriel • Burbank • La Canada Flintridge • Santa Ana • Claremont • La Puente • Santa Fe Springs • Covina • La Verne • Sierra Madre • Diamond Bar • Monrovia • South Pasadena • Downey • Newport Beach • Temple City • Duarte • Pomona • Torrance* • Glendale • Rosemead • Walnut *Finance Director is appointed by the City Council. All other Department Head positions are appointed by the City Manager. Summary of Findings In general, the survey indicates that cities requiring employment contracts for their respective Department Head positions still adopt and maintain salary resolutions for executive management employees, which establish the salaries and benefits afforded to Department Heads in those cities. The practice of establishing salaries and benefits for Department Heads by resolution is nearly universal among all cities regardless if the city requires employment contracts for Department Heads. Employment contracts essentially reiterate the salaries and benefits that have already been approved and established by Council resolution in cities that require Department Heads to enter into employment contracts. Cities that provide employment by employment contract typically use the same contract format for each of the various Department Heads. The advantage that employment contracts may offer is that they give City Councils the opportunity to review the experience, credentials, and agreed upon starting salaries of prospective Department Heads before an appointment is made by the City Manager. Essentially, the employment contract provides the City Council with the opportunity to review prospective Department Head candidates before the City Manager makes the final appointment to the executive position. An advantage that a contract may provide a Department Head is a severance package upon termination of employment, which currently does not exist for Department Heads. The disadvantages associated with requiring employment contracts for Department Heads are listed and explained below: Employment contracts introduce the potential to provide compensation and benefits outside of what Council has already approved and established by resolution. In essence, the use of Department Head employment contracts lends itself to the possibility that pay and benefits will differ among employees within the same classification series (i.e., Department Head classifications) with similar executive duties and responsibilities. This poses issues related to equity and fairness among employees if they receive different compensation and benefit packages for comparable work because they have individual employment agreements with the City. Of particular note is the possibility that employees within the same classification series will receive different retention (e.g., hiring bonuses) and severance benefits due their individual employment contracts. • Employment contracts weaken internal controls due to the precedent they set for providing different pay and benefits to employees within commensurate position classifications sharing similar levels of duties and responsibilities. This issue may lead to claims of unfair employment practices and liabilities against the City. Requiring individual employment contracts for Department Heads introduces the possibility that appointments to Department Head positions will be subjected to the political process, thus violating the founding principle of the Council -Manager form of governance which is to appoint and hold one executive (i.e., the City Manager) accountable for the operations and performance of the organization. This potential politicization of the executive team undermines the City Manager's span of influence and ability to effectively manage the organization. Moreover, this politicization weakens the Council's ability to hold the City Manager directly accountable for organizational performance if the executive team is politically appointed via Council approved employment contracts with each Department Head. • The potential politicization of Department Head positions through individual employment contracts weakens the internal controls of organizations who mismanage this process, thus exposing them to poor hiring practices and increased employment liabilities. Adds administrative costs associated with the time used for negotiating, reviewing, and acquiring approval of the employment contract. Alternatives The alternative to requiring employment contracts for each Department Head is to establish a process where the City Manager presents the City Council with his/her choice for an open Department Head position prior to making the final appointment. This process helps mitigate the potential disadvantages associated with having Department Heads enter into individual employment contracts while providing the Council with an opportunity to review the City Manager's choice before a final appointment to the Department Head position is made. Most importantly, this process maintains the fundamental principle of the Council -Manager form of governance and it keeps the salaries and benefits for Department Heads equitable and in -line with the salaries and benefits that have been established by Council resolution for all position classifications, including Department Heads. This hybrid of the traditional appointment process for Department Heads addresses both the advantages and disadvantages associated with having Department Heads enter into individual employment contracts with the city. Municipal Code Requirement Currently, the appointing authority over Department Heads is vested with the City Manager pursuant to Article IV, Section 2-151 (g) of the City of West Covina Municipal Code. If the City Council wishes to retain the appointing authority over Department Heads, it must amend Article IV, Section 2-151 (g) which vests the appointing authority of "all officers and employees of the city, except the city clerk, city attorney and city treasurer" with the City Manager. OPTIONS: The following options are available to the City Council: 1. Institute a process where the City Manager provides courtesy notice to the City Council prior to making an employment offer to any new Department Head; 2. Institute a process where the City Manager selects the new Department Head and provides the proposed employment contract for the City Council's ratification; 3. Institute a process where the City Council selects and negotiates the employment contract for the new Department Head; 4. Receive and file this report; or 5. Provide alternative direction. Prepared by: Edward M. Macias, Director of Human Resources and Risk Management Fiscal Impact FISCAL IMPACT: None.