22-720 - A resolution directing the City Manager to pursue immediate changes to the City’s Overtime Policies and Practices.

City operations, which include utilities, public safety, and other essential services, have the potential to require a response at any hour of the day, on weekends, holidays, and emergency situations. As a result of the unpredictable nature of the services the City provides, overtime is a necessary and important part of the provision of these services. The Fair Labor Standards Act (FLSA) provides the legal mechanism to fairly compensate employees for their work and recognize the disruption to their lives by working hours outside of their regular shifts. 

Revising overtime practices has been a long-standing recommendation of City Management and aligns with the City's unanimously-approved Strategic Plan, Independence for All within the goal Financially Sustainable. It is the responsibility of City Management to present opportunities to strengthen our policies, model best practices, and promote the efficient use of public resources.  It is the responsibility of City Council to determine which of these recommendations will be adopted.

Below is a table outlining overtime hours and compensation by department for calendar year 2021. This table excludes the Fire Department due to different FLSA standards for Fire Service personnel.

According to the Department of Labor:

•  The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek.
•  Overtime: Covered nonexempt employees must receive overtime pay for hours worked over 40 per workweek (any fixed and regularly recurring period of 168 hours – seven consecutive 24-hour periods) at a rate not less than one and one-half times the regular rate of pay. There is no limit on the number of hours employees 16 years or older may work in any workweek. The FLSA does not require overtime pay for work on weekends, holidays, or regular days of rest, unless overtime is worked on such days.

Article VI, Section B6 of the Personnel Policies and Procedures Manual specifies the methodology in which overtime is calculated:

Unless otherwise provided by separate work agreement, all non-exempt employees working in excess of forty (40) hours per week shall be compensated at the rate of one and one-half (1½) times their regular hourly rate of pay. For purposes of this subsection, when calculating total hours per week worked, holidays, vacation, sick leave, and personal business leave are included.

This methodology includes all paid leave (e.g., Sick Leave, Vacation, Holidays, Personal Business, etc.) which is not consistent with FLSA. A survey of ten nearby Missouri cities reflects the following overtime practices (Lees Summit, Kansas City, Blue Springs, Gladstone, Raytown, Riverside, North Kansas City, Raymore, Grandview, and Parkville):

Based on this survey, one City (Lee's Summit) calculates overtime in the same manner as Independence and seven cities calculate overtime based on hours worked. 

Attachment 1 provides a few typical examples of how overtime is currently calculated and accounted for and the impact of updating City policy. As the attachment reflects, overtime hours in this sampling would be reduced from 4,041.51 hours to 1,679.50, representing a 58% decrease. Similarly, overtime costs are reduced from $272,938.20 to $188,945.87, representing a decrease of $153,992.42 or 56%.  

Section 3.17 of the City Charter is as follows:

Municipally owned and operated utilities and enterprises. The municipally owned and operated electric system is a public utility and shall be operated in a businesslike manner. 

Based on the limited sampling of the five utilities employees in Attachment 1, the City’s public utilities, and by extension, rate payers, would realize a savings of 83%, or $99,000 by updating the City’s overtime policies. Further analysis would be required to determine the full impact on the City’s utilities.  

It is recommended City policies are updated to calculate overtime based on Hours Worked, including Holidays only.  The proposed language is included in the attached City Council Resolution.  Further, it is recommended the City Council provide direction to the City Manager to request reopening the work agreements with the City’s bargaining units that have overtime provisions not in alignment with the proposed City Policy and FLSA and work towards updating those provisions. 

The adopted budget for overtime in Fiscal Year 2021-22 was $6.5 million citywide, of which $2.9 million was budgeted in the General Fund. Presently, the City is projected to expend a total $6.3 million in overtime this fiscal year, of which $3.1 million is in the General Fund. The overage in General Fund overtime is due primarily to the minimum staffing requirements within the Fire Department.

If adopted, this provision would substantially reduce the City's annual overtime expenditures.