State Compensation Insurance Fund’s new policy governing use of state cars and what constitutes an eligible employee is raising hackles with its largest union. Service Employees International Union (SEIU) is angry about the way the policy was adopted and its impact on employees. SEIU maintains that such broad policy changes should be the result of labor-management negotiation, and sent a cease-and-desist letter to block the policy change.

SEIU’s protests come despite the facts: Investigations revealed that use of cars as a perk were a large part of the culture of corruption found at SCIF in the wake of terminations of certain board members and officers over a lengthy period beginning in 2006. The automobile perk was used as both reward and punishment for employees who played the game.

The policy change is expected to move the troubled company toward a different culture and lower overhead by reducing the workers’ comp carrier’s fleet by some 1,000 cars.

Industry observers say that SEIU Local 1000 seems bent on interfering with attempts to clean up SCIF’s culture—one of the very problems its rank and file have complained about. This is consistent with SEIU’s reputation in general both within and outside of government. SEIU’s national management has been closely linked to ACORN. Many SCIF employees are said not to agree with the union’s position.

SCIF management is taking this long-overdue step to cull some of the “culture” in the quasi-state agency. Other state agencies, including the California Department of Insurance and the California Waste Watcher Program, brought these issues to light. More than half the cars are being pulled. They are coming principally from SCIF employees who have them as a perk and do not use them for work. About 25% of SCIF’s workforce (some 1,800 employees) drive state vehicles. Each employee with a car also gets a gas card for that car.

The union does not mention the carrier’s plan to increase the number of pool vehicles available to all employees to use for company business while it decreases the number of assigned cars.

Nonetheless, SEIU maintains it was kept on the sidelines and not consulted when management announced this step. But a SCIF spokeswoman says management has every intention of engaging with the union. It was listed as an agenda item at the last regular board of directors meeting but was fenced off in closed session.

Impact of Cease and Desist

The cease-and-desist letter has no legal force and is merely a warning shot from SEIU attorneys. The move sets the stage for a future unfair-labor-practice charge but may also be a little premature — as conceded in the letter itself.

"Under the Dills Act, the Public Employee Relations Board (PERB) has consistently found that the use of an employer-provided vehicle is a direct economic benefit to the employee, and within the scope of bargaining. The implementation of this policy without bargaining over the disruptive and far-reaching effects of such a change would constitute a blatant violation of the Dills Act.”
—Paul Harris, SEIU attorney

“Under the Dills Act, the Public Employee Relations Board (PERB) has consistently found that the use of an employer-provided vehicle is a direct economic benefit to the employee, and within the scope of bargaining,” union attorney Paul Harris maintained in the letter to SCIF management. “The implementation of this policy without bargaining over the disruptive and far-reaching effects of such a change would constitute a blatant violation of the Dills Act.”

The operative term is “would” because no one has been forced to give up his or her company car as yet.

But beyond the framework for a future dustup before PERB, the letter also lays out the union’s complaints about the policy as currently constructed. As articulated in an email blast sent around to employees by chief operating officer Harrison Jerome announcing the policy change, employees will qualify for a car only if 80% of the miles put on it are for company business. Employees also will be taxed on the full fair market value of any personal miles driven. Workers with 25-mile commutes could see their taxable income increase $4,000 to $9,000 under the policy (For past coverage, see State Fund Opts...)

The union maintains that the 80% rule is too strict even by SCIF’s own standards. Harris notes that business use of a vehicle is established with just 50% of the miles driven for official business.

On the other hand, SEIU is offering to pay the taxes due from employees’ use of the cars. Many employees are choosing to turn them in rather than pay the tax.

The union argues that the policy is discriminatory against those employees with longer commutes. “This rule limits the long-standing use of State Fund vehicles to only those employees who live in close proximity to State Fund offices, witnesses and hearings, regardless of whether other employees require State Fund vehicles in order to work effectively and fulfill their occupational responsibilities,” Harris wrote.

SEIU is not alone in its fight over the rules change. The California Attorneys, Administrative Law Judges and Hearing Officers (CASE) also registered its objection with the carrier, in particular lodging a complaint against the planned change in IRS reporting. CASE represents SCIF’s in-house attorneys, who will be impacted nearly universally.

CASE General Counsel Pat Whalen maintains that SCIF failed to give employees timely notice of the income reporting change, which will be applied retroactively to the beginning of the year.

He also disputed the notion that a state car was a benefit at all and instead is a “required tool of the job,” Whalen noted in the CASE opposition letter. “Accordingly, the question has been raised as to whether State Fund should ever have required any deduction whatsoever from CASE members based on the vehicle. To the extent State Fund has been wrongfully withholding wages from CASE members for years, I strongly advise against you implementing any policy which might operate to increase that wrongful withholding,” Whalen wrote. He told Workers’ Comp Executive that the union also has retained its own tax counsel to pursue the issue. 

No Public Discussion

A large part of the SEIU and CASE complaints has been about process and a perceived lack of communication — at least two-way communication between management and labor. SEIU representatives tried to get the SCIF board of directors to discuss the issue at a recent public meeting but failed. The issue of “Fringe Benefits” was listed as one of the agenda items at the carrier’s last board of directors meeting — the first since the policy change was announced.

“SCIF sent an email blast to their employees, but it does not mention the objections we raised.”
—Kathleen Collins, SEIU 1000

But there was a catch. The item was slated for discussion during the part of the meeting closed to the public. Union representatives objected to the closed-door discussions to no avail, and were shown the door when the committee adjourned to closed session. They raised the issue again when the full board was back in open session and again received no response.

Kathleen Collins, a SCIF employee and union member who raised the issue with the board, noted that SCIF employee communications about the meeting were also silent on the issue. “SCIF sent an email blast to their employees, but it does not mention the objections we raised,” she noted to Workers’ Comp Executive.

Negotiations about the auto policy will come in due time, says SCIF spokeswoman Jennifer Vargen. Noting that a cease-and-desist order may be premature since the program won’t be in place for another month, she maintains that SCIF will meet with the union over this, just not at this time. Right now she says an employee-management task force is working on an implementation plan to be presented to the union at a later date.

A copy of SEIU’s cease-and-desist letter is available in our Resources section or by clicking here. Harrison Jerome’s initial announcement of the new fleet policy is available by clicking here.