U.S. Bankruptcy Judge John E. Ryan approved a compromise Thursday that requires Orange County to respect employee seniority rights in layoffs resulting from its financial crisis but limits the appeal process for anyone who loses a job.
The agreement between the county and 10 unions that represent 16,000 employees requires the rehiring of 30 to 40 employees who were laid off in January, attorneys and union representatives said. But those employees will displace the same number of workers who have shorter tenures with the county.
The rest of the laid-off workers have the right to appeal, but must do it within a month instead of the average of seven months they have been allotted in the past.
Both sides hailed the compromise as a way to meet the county's need for speedy, money-saving cutbacks while protecting the jobs of longtime employees.
"It's a definite victory," said county firefighter William C. Cuthbertson Jr. "It shows the county that, yes, it does have rights, but they aren't unbridled and they have to give due consideration to our rights."
The agreement, which settled several major disputes over layoff procedures, came after 2 1/2 weeks of on-again, off-again negotiations between labor and management representatives, including an eight-hour closed session with Ryan on Tuesday.
Ryan's ruling allows the county to move forward with more cuts to help ease its massive cash shortfall, which is pegged at $172 million for the fiscal year ending June 30. The county has announced that it intends to lay off as many as 400 workers, including the 152 that have already been let go.
County attorney Jeffrey Krause said officials have not yet made a final decision on the number or timing of future layoffs. "But I think at some point it's inevitable there will be additional labor cuts," he said.
Both sides praised Ryan for guiding the groups through the sometimes vitriolic battle that erupted when county officials announced in December they would lay off workers and suspend some parts of employee contracts without first meeting with union representatives.
The unions took the matter to court, and on Jan. 20 Ryan issued a temporary restraining order that prohibited additional layoffs until an agreement could be reached.
In other developments Thursday:
* Bruce Bennett, the county's bankruptcy attorney, responded to criticism of a proposed plan to allocate funds remaining in the investment pool that was unveiled earlier this week, saying some investors' demands were unrealistic.
"It's a package deal," he said. "You can't pick and choose the parts you agree with. . . . If you change the numbers, you're not going to come up with a workable plan."
Bennett challenged disgruntled investors to come up with a plan "the county can live with, the bondholder constituency can live with and the pool investors constituency can live with." For now, Bennett said, the only alternative to the plan is "some pretty ugly, pretty lengthy and pretty difficult litigation."
* Interim County Treasurer Thomas E. Daxon said eight employees from his office who were placed on leave Jan. 27 will return to their jobs today, apparently cleared in an investigation of whether they played any role in questionable transactions by the office. Another staff member is expected to return to work Tuesday, Assistant Treasurer Keith Johnson said.
Fifteen employees were suspended after officials discovered that former Treasurer-Tax Collector Robert L. Citron's office may have improperly shifted at least $140 million in county losses into pool accounts shared by other public agencies during Citron's tenure.
* Daxon also said in an interview with the Associated Press that a tax increase may not be necessary to meet obligations and pay off schools, cities and agencies with money in the bankrupt county investment pool. Cost cutting, aggressive sales of county property and opening services to competitive bidding may be enough to fill the gaping holes created by the pool's $1.69-billion loss.
"I think it would be wrong--it's certainly wrong to me--to recommend that we finance this through taxes until we've done our homework on all the other alternatives," said Daxon, a former Oklahoma state auditor hired to help sort out the Orange County mess.
The proposal brokered by Orange County Business Council leaders and approved by all five county supervisors this week called for paying off the 186 non-county investors in full within 15 years. The business leaders said, though, that temporary new taxes would be needed for it to succeed.
* Without specifically calling for higher taxes, California Treasurer Matt Fong pleaded with county leaders Thursday to rule out defaulting on municipal bond payments. The county has more than $1 billion due by early summer, with a shortfall in reserves to make the payments of about $385 million.
"Confidence in government cannot be restored if the county defaults on an obligation," Fong said in a statement.
* A joint statement by Orange County's Official Creditors' Committee and the Bondholders' and Vendors' Subcommittee urged county officials "to produce a simultaneous plan to pay all county debts in full according to original terms."
The statement came in response to the business council's payout plan, which offers investors in the county's bankrupt fund 77 cents on the dollar, plus notes and liens that could result in full repayment within 15 years. The creditors didn't reject Orange County's proposal, calling it "a constructive first step toward solving Orange County's financial crisis."
* Robert W. Poole Jr., president of the Santa Monica-based Reason Foundation, said he will release details of his organization's ideas for the county's recovery at a luncheon address to the Orange County Forum on Wednesday.
In a study first requested by the conservative Lincoln Club, the foundation looked at possibilities for privatization, the sale of certain county assets, and "cutbacks in county staff and compensation," said Poole, who acknowledged that some aspects of the plan are likely to be controversial.
"These are the kinds of trade-offs (the county has) to look at when the alternatives are tax increases," he said.
* Officials of the League of California Cities' Orange County division met in Santa Ana and said the county should consider various ways of trying to recover from the financial crisis. Among its suggestions: the county should sell off some assets, allow cities and special districts to provide services where appropriate, and establish a task force to study the feasibility of creating a charter county.
A key guideline in Thursday's agreement between the county and its unions requires the county to honor the "bumping" process in employee contracts. That provision allows senior employees to replace more junior employees in lower-paid jobs.
The agreement permits the county to establish smaller groups, known as "layoff units" within which employees would have bumping rights. In the past, employees typically have been laid off--and given bumping rights--according to their seniority within larger sections of the county work force, such as divisions or departments, officials said. The county may now target smaller groups of workers, and employees would bump down within those units.
Ryan insisted that smaller layoff units can be established only for valid business reasons, not to violate employees' seniority rights. He also guaranteed that unions can bring their objections about future layoff units to him.
The county also has the right to fire a worker for substandard performance without regard to seniority and can retain employees with special skills even if they are less senior than other workers.
Ryan left open the possibility of changing the agreement if some aspects prove unworkable.
"None of this is cast in stone," Ryan said. "We will review this thing, and if some things don't work we'll make appropriate changes, and that goes to both sides. I don't expect this will be the last time we talk about these issues."
Ryan also set a March 23 hearing to discuss other labor issues that remain in contention between the county and unions. Among them are disputes over merit increases, salary adjustments and accrued vacation compensation for retiring, quitting or laid-off employees.
After the hearing, Orange County Employees Assn. spokeswoman Tobye Lovelace said that despite the unions' relief over the agreement, the battle to win concessions from the county has strained relations between the county and its employees.
"We believe county officials have created a very hostile work force which is very untrusting," said Lovelace, whose union represents 11,000 employees. "It's definitely affected productivity. It could take a generation of employees to move past the destruction."
Ryan encouraged both sides, however, to move forward with solutions, rather than "fighting for causes that could result in destructiveness."
"I think there's a better understanding on both sides as to needs, rights and responsibilities," Ryan said. "I want you to go forward. You know the road. Now it's a matter of going down the road together to the extent we have to."
BRADY CRUNCH: Irvine city manager fights for creditors and for his job. A16
DEFAULT LINE: Official rhetoric doen't match risk of O.C. bond default. D3