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DPA Case Number 11-R-0136 - Appeal of Demotion in Lieu of Layoff

DPA Case No.:  11-R-0136 - Appeal of Demotion in Lieu of Layoff

Final Decision Adopted February 16, 2012
By:  Ronald Yank, Director


This matter was heard before Karla Broussard-Boyd, Administrative Law Judge (ALJ), Department of Personnel Administration (DPA) at 1:00 p.m. on October 26, 2011 in Sacramento, California.
Appellant was present and represented by Gerald James, Lead Counsel, Professional Engineers in California Government (PECG). 
Corina B. Dragan and Nicole D. Lobre, Labor Relations Counsel, DPA represented the California Department of Corrections and Rehabilitation (CDCR), respondent. The parties filed closing arguments on January 17, 2012.


Appellant received a formal demotion in lieu of layoff notice from CDCR, respondent, dated, August 26, 2011, with an effective date of October 2, 2011.  Appellant filed an appeal from demotion in lieu of layoff with DPA on September 23, 2011. 
Government Code section 19997.14 provides an employee may appeal to DPA within 30 days after receiving a notice of demotion in lieu of layoff on the grounds the required procedure has not been complied with or the demotion has not been made in good faith or was otherwise improper.  The appeal complies with the procedural requirements of Government Code section 19997.14.  DPA has jurisdiction over the appeal.


Appellant contends although respondent complied procedurally with the layoff process, the layoff was made in bad faith.  He argues respondent did not have a lack of work or funds to justify a layoff.
Respondent argues appellant cannot meet his burden of proof because the layoff was made in good faith and was proper.
The issues to be determined are:
1. Were the statutes and rules applicable to layoffs followed?
2. Was the layoff made in bad faith?
3. Was the layoff otherwise improper? 


The evidence established the following facts by a preponderance of the evidence:
The parties stipulated the procedural rules and statutes applicable to layoffs were followed. 
On February 15, 2011, Governor Edmund G. Brown Jr. issued Executive Order B-3-11.  The Governor ordered all agencies and departments to work with the Department of Finance to develop targets for budgetary reduction to close the $25.4 billion deficit.  The order required respondent, CDCR, to consider layoffs and it developed a layoff plan.  The plan was called the 2011 HQ Reduction plan.
At the time of the 2011 HQ Reduction plan, appellant was a Supervising Architect in respondent’s Architect and Engineering Division (A/E) which is part of the Facilities Planning and Construction Management Division (FPCM).  A/E is responsible for plans and specifications for the 33 correctional facilities throughout the state.  Prior to the layoff, appellant’s monthly salary as a Supervising Architect was $9,842.00.  After his demotion in lieu of layoff, appellant was a Senior Architect with a salary of $9,870.00.  There was no evidence detailing all costs associated with appellant’s salary.
Throughout his tenure, appellant provided input regarding the hiring of outside consultants.  He was instrumental in securing outside consultants who act as construction support and assist in plan discrepancies, problem-solving and submittal reviews.  As recently as two days before his demotion in lieu of layoff, appellant was responsible for recommending which projects were good candidates for outside consultants.  No contracts were introduced into evidence and there was no evidence which, if any, of appellant’s recommendations were adopted.   
The Deputy Director oversees five (5) branches in FPCM.  She was responsible for determining the areas of layoff for respondent’s 2011 HQ Reduction plan.  In February 2011, during the early stages of the layoff process, appellant’s position was not impacted by the plan, but in the final analysis, 22 employees were impacted.  This included 2 employees in the A/E Division, including appellant’s Supervising Architect position.  Appellant was demoted in lieu of layoff, while the other impacted position of Architectural Designer (AD) was laid off. 
The Deputy Director explained the layoff plan was not the result of a work shortage.  The use of outside consultants did not increase as a result of the layoff as projects are postponed and take longer to complete.  Most of the outside consultants are retainer contracts.  Retainer contracts are those contracts which run for a period of time, generally 3 years and are not self-executing.  Because they are not self-executing contracts, respondent must approve any additional work.  Respondent has not entered into any new contracts since the 2011 HQ Reduction plan layoff. 
The Placement Analyst, in respondent’s Resource Planning Reduction Section (RPRS), was the Lead Analyst responsible for implementing the 2011 HQ Reduction plan.  She has assisted respondent in approximately 15-20 layoffs since August 2009 because of ratio changes (ratio of employees to inmates) and the shifting of wards and inmates to the counties.  She further explained this was not an AB 109 (fn.1) layoff.
On August 4, 2011, respondent advertised for a Principal Architect (PA) position.  The PA position had been vacant for at least 2 years and was not impacted by the 2011 HQ Reduction plan.  Appellant applied and was interviewed for the position.  The Placement Analyst explained that shifting appellant to the PA position would have been considered a promotion which is not allowed during the layoff process.  The PA position could not simply be given to appellant as it would have circumvented the layoff process. 
The Placement Analyst explained even though appellant may make more money in his demoted position, it is not promotional.  An impacted class is under a hiring freeze which was not the case with the PA.  The 2011 HQ Reduction plan was initiated on June 1, 2011 with a layoff effective date of October 2, 2011.  Approximately six employees were actually laid off and every program within the area of layoff, headquarters or Sacramento County, was impacted. 


Government Code section 19997 provides:  “[w]henever it is necessary because of lack of work or funds, or whenever it is advisable in the interests of economy, to reduce the staff of any state agency, the appointing power may lay off employees pursuant to this article and department rule.”  DPA is authorized to order reinstatement of the employee, with or without pay, if it appears the correct procedure was not followed, the layoff was not made in good faith or the action was otherwise improper.  (Gov. Code, § 19997.14.)

The statutes and rules applicable to layoffs were followed. 

The parties stipulated the statutes and rules governing civil service layoffs, specifically Government Code section 19997 et seq., were followed.
The layoff was not made in bad faith.

Appellant has the burden of proof and must prove by a preponderance of the evidence the layoff was made in bad faith or was otherwise improper.  (Aguilar v. Atlantic Richfield (2001) 25 Cal.4th 826.) 

Appellant first argues because there was no lack of work or lack of funds, the layoff, or more correctly, the demotion in lieu of layoff, was made in bad faith.  Bad faith generally implies or involves actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation.  It is not simply bad judgment or negligence, but implies a conscious doing of a wrong because of dishonesty purpose or moral obliquity.  (See Black’s Law Dict. (6th ed. 1990) p. 139, col. 1.)

Appellant derives his argument from Government Code section 19997.  “Whenever it is necessary because of lack of work or funds, or whenever it is advisable in the interests of economy, to reduce the staff of any state agency, the appointing power may lay off employees pursuant to this article and department rule.  [Emphasis added.]  However, appellant relies on the first section of the statute and ignores the complete language of the statute.  In other words, lack of work or funds are not exclusive reasons an appointing power may implement a layoff.

Moreover, by stipulating the statutes and rules governing civil service layoffs were followed, appellant cannot now make a successful argument for bad faith the statutes and rules were not followed.  “Stipulation” is an agreement between opposing counsel, ordinarily entered into for, purpose of avoiding delay, trouble, or expense in conduct of action, and serves to obviate need for proof or to narrow range of litigable issues in legal proceeding.  (County of Sacramento v. Workers' Comp. Appeals Bd., (2000) 77 Cal.App.4th 1114.)  A poor outcome following appellant’s agreement is no reason to set aside the stipulation. 

Appellant’s second argument is respondent acted in bad faith because, although effectively demoted from an Supervising Architect to a Senior Architect, he received an increase in pay.  This counterintuitive argument ignores the statutory scheme allowing considerable latitude to the appointing power “in the interests of economy.”  Here again, respondent’s conduct does not rise to the level of bad faith as the conduct complained of by appellant does not imply a consciousness of wrongdoing.  Wrongdoing would insinuate appellant was damaged by respondent’s conduct, when in fact appellant benefited from respondent’s layoff plan.  He continued to work and enjoyed an increase in salary.

Had appellant suffered the same fate as six other employees and lost his job, perhaps a better argument could be made.  But because respondent’s layoff plan placed appellant in a better position than before the layoff, his argument the layoff plan was in bad faith is without evidentiary support.  

Appellant’s argument his salary increase was in bad faith, though novel, is equally flawed because there was no evidence to show all of the costs associated with his new position.  Granted, his new salary paid $28.00 more per month; however, there was no evidence as to whether respondent had increased costs associated with appellant’s new rank-and-file status.  Without adequate evidence of the actual costs associated with appellant’s demotion in lieu of layoff, it is impossible to conclude respondent is now spending more on appellant than before his demotion in lieu of layoff.

Accordingly, appellant’s contention, this is an “apples to apples” comparison must fail.  His attempt to compare the $75.00 hourly salary of a state architect, less “fixed overhead,” with an outside consultant hourly salary of $145-$165, obviously ignores the variable of “fixed overhead” and other costs associated with appellant’s new rank-and-file status.   

Similarly, appellant’s third argument respondent is now forced to increase its outside consultant contracts at a higher cost, was not supported by the evidence.  There was no evidence presented which demonstrated respondent had outsourced any contracts since it implemented its 2011 HQ Reduction plan.  While there was evidence many retainer contracts were yet to be performed, it is unclear which, if any, of the outside consultant contracts have been approved or let.  Additionally, simply because appellant believes the workload of A/E has increased, does not make it true. 

Lastly, appellant argues that during the layoff period, specifically on August 4, 2011, respondent advertised for a PA position.  Courts have upheld a layoff even though at the same time the department was laying off employees, it employed others in new positions.  (Peradotto v. State Personnel Board (1972) 25 Cal.App.3d 30.)  Appellant offers no authority on why merely advertising for a PA during the layoff period constitutes bad faith.  Conversely, respondent’s layoff analyst provided credible evidence that the PA position was not a class impacted by the layoff and respondent was free to advertise the position.  

The layoff was proper.

Appellant argues simply because respondent was facing position and budget restrictions, it is not a blanket justification for all layoffs.  This argument is misplaced.  “Reorganization of governmental offices promulgated in good faith and for reasons of efficiency or economy does not ‘nullify the basic principle’ of civil service even though it results in abolition of one or several civil service positions.”  (Peradotto v. State Personnel Board, supra, 25 Cal.App.3d at p. 36, citing Placer County Employees Assn. v. Board of Supervisors (1965) 233 Cal.App.2d 555.)
Furthermore, in 1993 the California Public Employment Relations Board held, “that the state employer’s fundamental management prerogative to reduce operations includes the authority to identify the specific component of a state agency to be the subject of reduction.  This prerogative includes the right to designate specific positions in specific locations to be reduced through layoff.”  Respondent exercised its prerogative and properly demoted appellant in lieu of layoff.


Respondent’s demotion in lieu of layoff of appellant was proper and followed the procedural requirements of Government Code section 19997 et seq. and department rules governing layoff.  Respondent was well within its rights to demote appellant in lieu of layoff in accordance with Executive Order B-3-11.  There was no showing of bad faith in the administration of appellant’s demotion in lieu of layoff.

* * * * *
 THEREFORE, IT IS DETERMINED, the demotion in lieu of layoff appeal, from the position of Supervising Architect, effective October 2, 2011, is denied.


1. AB 109 shifts the responsibility for incarcerating many low-risk offenders from the state to the counties.  It is also referred to as "prison alignment."

  Updated: 8/22/2013
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