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AGO Opinion 97002

Buy-Outs for State Employees
Opinion 97002




DATE: January 7, 1997




SUBJECT: Buy-Outs for State Employees




REQUESTED BY: Lawrence S. Primeau, Director

Department of Administrative Services




WRITTEN BY:Don Stenberg, Attorney General

Dale A. Comer, Assistant Attorney General






You state that you are contemplating certain proposed legislation to be

introduced in the 1997 legislative session, and therefore, you have requested our

opinion on a number of legal issues involving state employee buy-outs. We will

respond to each of the questions you presented separately below.




1. Is there a legal right to continued employment?




The general rule in Nebraska with respect to the right of employment is the

"at will" rule. That is, when the employment is not for a definite term, and

there are no contractual or statutory restrictions upon the right of discharge,

an employer may lawfully discharge an employee whenever and for whatever cause

he chooses, without incurring any liability. Smith v. City of Omaha, 220 Neb.

217, 369 N.W.2d 67 (1985); Mau v. Omaha National Bank, 207 Neb. 308, 299 N.W.2d

147 (1980). As a result, government employment, in the absence of legislation,

can be revoked at the will of the appointing officer, so long as the public

employee is not dismissed or terminated for constitutionally impermissible

reasons such as race, religion, or the assertion of rights guaranteed by law or

under the Constitution. Nevels v. State, 205 Neb. 642, 289 N.W.2d 511 (1980).








While the "at will" rule applies generally to state employment, a public

employee cannot be deprived of a property interest in continued employment

without a due process hearing and appropriate notice. Benton v. Board of

Education of School District No. 17, 219 Neb. 134, 361 N.W.2d 515 (1985); Weeks

v. State Board of Education, 204 Neb. 659, 284 N.W.2d 843 (1979). The existence

of such a property interest must be determined by state law. Packett v.

Stenberg, 969 F.2d 721 (8th Cir. 1992). Typically, such a property interest

arises from statutory or contractual limitations on the employer's ability to

terminate an employee, and a court must look to the contract of employment and

to state law to determine if there are any rules or understandings that secure

certain benefits and support claims of entitlement to those benefits. Packett

v. Stenberg, supra; Tautfest v. City of Lincoln, 742 F.2d 477 (8th Cir. 1984).




The statutes creating the Nebraska State Personnel Service are found

generally at Neb. Rev. Stat. §§ 81-1301 through 81-1354.05 (1994, Cum. Supp.

1996). In addition, the State Personnel Division of the Department of

Administrative Services has promulgated the Classified System Personnel Rules &

Regulations ("Personnel Rules"), 273 NAC 1-16, and those regulations were duly

adopted in accordance with the provisions of the Nebraska Administrative

Procedure Act. As a result, the Personnel Rules are as binding as statutes

enacted by the Legislature. Douglas County Welfare Administration v. Parks, 204

Neb. 570, 284 N.W.2d 10 (1979). The Personnel Rules apply to certain classified

or "code" agencies, while other agencies and departments of state government are

specifically exempted from coverage under those rules. See Neb. Rev. Stat. § 81-

1316 (Cum. Supp. 1996); 273 NAC 1. In addition, state employees covered by

collective bargaining agreements or union contracts are not covered by the

Personnel Rules to the extent that their contracts provide separately for wages,

hours, and other terms and conditions of employment. 273 NAC 1.




Under the Personnel Rules, new state employees serve an initial six-month

probationary period during which they may be separated from state employment at

any time without grievance rights. 273 NAC 5. However, after that probationary

period, the Personnel Rules establish certain specified offenses which will lead

to disciplinary action against state employees, including dismissal. 273 NAC 13.

Presumably, non-probationary state employees subject to the Personnel Rules may

not be terminated for disciplinary reasons in the absence of such an offense.

In addition, the Personnel Rules establish rules for state employee lay-offs and

bumping rights. 273 NAC 12.




We believe that the statutes and Personnel Rules establishing the State

Personnel Service create a property interest in continued state employment which

cannot be abrogated for the state employees covered by those rules without a due

process hearing and appropriate notice. See also Packett v. Stenberg, 969 F.2d

721 (8th Cir. 1992) (stating that state employees in Nebraska are "arguably"

granted a property interest in their employment by the state personnel system

which sets forth procedures for selection, compensation, grievances, etc. of

state employees); Hill v. Gerber, 217 Neb. 670, 350 N.W.2d 545 (1984) (impliedly

recognizing a property interest in public employment under the Nebraska Merit

System). Also, in the event of state employee lay-offs caused by decreased

funding or other reasons, state employees with bumping rights under the Personnel

Rules have a property interest in the exercise of those rights. See also Smith

v. Sorensen, 748 F.2d 427 (8th Cir. 1984) (interpreting the nature of the bumping

rights under the reduction in force guidelines established by the Nebraska Merit

System).




With that analysis in mind, it seems to us that the answer to your initial

question is "yes," to a limited degree. That is, state employees who are not

covered by the Personnel System and Personnel Rules or who are not covered by a

labor contract generally have no legal right to continued employment. On the

other hand, state employees subject to the Personnel Rules or labor contracts

have the rights established by those enactments and agreements and are not

employees "at will." In that limited sense, therefore, those latter state

employees have some legal right to continued employment.




2. Can a value be assigned to continued employment?




We are not entirely sure what you mean by "value" in your second question.

However, if a person were to be improperly deprived of a legitimate contractual

right to continued employment, we assume that, in the context of litigation, some

theory could be developed to place a value on that contract right. Such damage

theories are frequently developed by actuaries, economists, statisticians and the

like in litigation. Therefore, to that extent, we believe that some "value"

could be assigned to continuing employment. However, we are not certain what the

precise nature of such a valuation theory would be, and it also seems to us that

such a process would be speculative in many respects, given the number of

imponderables in government employment.




3. If continued employment is a legal right and can be assigned a

quantifiable value, can the value be paid to any state employee?




At the outset, it seems to us that there are two possible issues included

in this question. First, your question could involve the issue of whether the

Personnel Division of the Department of Administrative Services may pay the

quantifiable value of continued employment to any state employee under the

existing Nebraska statutes pertaining to the Personnel Service. Alternatively,

given your preamble regarding proposed legislation, your third question could

also involve the issue of whether legislation might constitutionally be drafted

which would allow the state to pay the value of continued employment to any state

employee. We have previously indicated that, under Fullmer v. State, 94 Neb.

217, 142 N.W. 908 (1913), it is our responsibility to provide opinions to state

officers upon questions of law which arise "in the discharge of their duties."

Op. Att'y Gen. No. 157 (December 24, 1985). In keeping with that responsibility,

it has been our general practice and policy to issue opinions to members of the

Legislature only with respect to pending or proposed legislation and not with

respect to the requirements of existing statutes. Op. Att'y Gen. No. 157

(December 24, 1985). Conversely, since it is generally the duty of members of

the Executive Branch of government to apply and enforce the existing statutes,

we have made it our policy to issue opinions to Executive officers only with

respect to their duties under existing statutes and not with respect to proposed

legislation. Based upon those policies, we will limit our response to your third

question to the first issue noted above. We prefer to address the alternative

issue in the context of an opinion request from a legislator in reference to

specific proposed legislation.


Generally, an administrative body has no power or authority other than that

specifically conferred upon it by statute or by a construction of the statutes

necessary to accomplish its purpose. Ventura v. State Equal Opportunity

Commission, 246 Neb. 116, 517 N.W.2d 368 (1994). We have reviewed the various

statutes pertaining to the State Personnel Service, the State Personnel Division,

and the Director of Personnel, and we have found no existing statutes which

specifically authorize the state to pay the quantifiable value of continued

employment to any state employee. As a result, we do not believe that the

value of continued employment can be paid to any state employee under the

existing statutes. This is particularly true since those same statutes provide

that other types of payment can be made for the value of employee benefits under

certain circumstances. For example, under Neb. Rev. Stat. § 81-1328 (1994),

state employees who retire or voluntarily separate from state employment can be

paid for their accumulated vacation time. And, under Neb. Rev. Stat. § 81-1325

(1994), state employees who retire can be paid for certain portions of their

accumulated sick leave. Consequently, we believe that the answer to your third

question, as we have articulated it, is "no."

4. Can a value be assigned to bumping rights?




Our answer to this question is much the same as our answer to question 2

above. If a person were to be improperly deprived of a legitimate contractual

right to "bump" other employees in the event of force reductions or lay-offs, we

assume that, in the context of litigation, some theory could be developed to

place a value on that contract right. Therefore, to that extent, we believe that

some "value" could be assigned to bumping rights. Again, however, we are not

certain what the precise nature of such a valuation theory would be, and the

process would obviously be speculative in many respects.




5. If a value can be assigned to bumping rights, may the state, without a

general reduction in force program, offer a buy-out to an employee or a

certain class of employees in lieu of an employee exercising his or her

bumping rights, resulting in the exit of the employee from employment in

state government and the filling of the vacant position by another

individual? Would that outcome be different if the position were

eliminated?




For the reasons discussed in our answer to your question number 3 above,

we will limit our response to your question number 5 to the issue of whether the

existing statutes allow the Personnel Division of the Department of

Administrative Services, without a general reduction in force program, to offer

a buy-out to a state employee or a certain class of state employees in lieu of

an employee exercising his or her bumping rights, thus resulting in the exit of

the particular employee from employment in state government and the filling of

the vacant position by another individual. Once again, we have reviewed the

various statutes pertaining to the State Personnel Service, the State Personnel

Division, and the Director of Personnel, and we have found no existing statutes

which specifically authorize the state to offer a buy-out to the employee or

employees involved in the situation you described. Therefore, our answer to your

initial question number 5 is "no." Our answer would remain the same if the

position or positions in question were eliminated.




6. If a value can be assigned to bumping rights, can the state offer a buy-

out to only one class of employees in lieu of exercising their bumping

rights? Would the outcome be different if the position were eliminated?




For the reasons discussed in our answer to your question number 3 above,

we will limit our response to your question number 6 to the issue of whether the

existing statutes allow the Personnel Division of the Department of

Administrative Services to offer a buy-out to only one class of employees in lieu

of exercising their bumping rights. We have reviewed the various statutes

pertaining to the State Personnel Service, the State Personnel Division, and the

Director of Personnel, and we have found no existing statutes which specifically

authorize the state to offer a buy-out to only one class of employees in lieu of

exercising their bumping rights. Therefore, our answer to your initial question

number 6 is "no." Our answer would remain the same if the position in question

was eliminated.


7. Is the right to continued employment a state liability that may be

purchased by the state in consideration for the employee's current accrued

benefits? (Benefits may include sick leave, annual leave, health

insurance, and vested retirement benefits.) Would the outcome be

different if the position were eliminated?




For the reasons discussed in our answer to your question number 3 above,

we will limit our response to your question number 7 to the issue of whether the

existing statutes allow the Personnel Division of the Department of

Administrative Services to purchase any limited right to continued state

employment in consideration for the employee's current accrued benefits such as

sick leave, annual leave, health insurance, and vested retirement benefits. We

have reviewed the various statutes pertaining to the State Personnel Service, the

State Personnel Division, and the Director of Personnel, and we have found no

existing statutes which specifically authorize the state to purchase any limited

right to continued state employment in consideration for the employee's current

accrued benefits. Therefore, our answer to your initial question number 7 is

"no." Our answer would remain the same if the position in question was

eliminated.




8. Is the right to continued employment a state liability that may be

purchased by the state in consideration for the employee's current accrued

and future benefits calculated to current dollar value? (Benefits may

include sick leave, annual leave, health insurance, future social security

contributions, and vested and future retirement benefits.) Would the

outcome be different if the position were eliminated?




For the reasons discussed in our answer to your question number 3 above,

we will limit our response to your question number 8 to the issue of whether the

existing statutes allow the Personnel Division of the Department of

Administrative Services to purchase any limited right to continued state

employment in consideration for the employee's current accrued and future

benefits calculated to current dollar value. We have reviewed the various

statutes pertaining to the State Personnel Service, the State Personnel Division,

and the Director of Personnel, and we have found no existing statutes which

specifically authorize the state to purchase any limited right to continued state

employment in consideration for the employee's current accrued and future

benefits calculated to current dollar value. Therefore, our answer to your

initial question number 8 is "no." Our answer would remain the same if the

position in question was eliminated.




Sincerely yours,




DON STENBERG

Attorney General






Dale A. Comer

Assistant Attorney General

05-58-14.op




Approved by:






______________________

Attorney General