260. Red Circle Rates

Introduction

A red circle rate is a rate of pay authorized for an individual above the maximum salary for his or her class. It is intended to mitigate the hardship when an employee’s salary is to be lowered through no fault of the employee. Red circle rates are not automatic, and they are not a right. Never use a red circle rate in cases where the lowered salary is the result of disciplinary action.

Definition of Terms

Management-Initiated Change

Management-initiated change is any major change in the type of classes, organizational structure, and/or staffing levels in a program. Such a change is normally intended to improve the program’s effectiveness or otherwise adapt to its needs. A reduction in force may occur as a result.

Lessening of Abilities

Lessening of abilities refers to an employee who, after many years of satisfactory service, no longer possesses the ability to perform the duties and responsibilities of his/her position. This may occur through a gradual decrease in the employee’s physical or mental capacity or a gradual change in the complexity of the position to which the employee cannot adapt.

Downward Reclassification

Downward reclassification is when, as a result of SPB action or a DPA staff determination, an incumbent’s position is moved to a lower class without the duties being changed.

State Service

State service is the official number of months an employee has worked for the State based on qualifying pay periods (DPA Rule 599.608).

Split Off

Split off is when one class is split into two or more classes, one of which is at a lower salary level than the original class.

Allocation Standard Changes

Allocation standards for two or more classes may change to the degree that a position originally allocated to one class may be reallocated to a class with a lower salary without a change in duties.

Changes in Salary Setting Methods

Revised valuation standards applied in setting the salary for a class may result in reducing the salary of a class.

When Red Circle Rates are Authorized

Government Code Section 19837 authorizes the permissive granting of red circle rates in two general circumstances. This GC Section is supersedable by MOU; be sure to review appropriate MOUs prior to approving a red circle rate to ensure that they do not contain provisions contrary to those in GC Section 19837. DPA Rule 599.679 explains how to determine the salary of an employee with a red circle salary who moves to another class.

Employee Does not Leave Position

If a salary reduction is the result of split-off, changes in allocation standards, changes in salary-setting methods, or a downward reclassification initiated by SPB action or DPA staff determination, the affected employee may receive a red circle rate regardless of the employee’s State service total, and the employee may retain it until the maximum salary of his or her class equals or exceeds the red circle rate.

Movement of an Employee From Another Public Jurisdiction to the State

An employee whose position is blanketed into the State civil service (SPB Rule 275) from another public jurisdiction may receive a red circle rate regardless of length of service in the other jurisdiction and may retain it until the maximum salary of the class to which the employee’s position is allocated equals or exceeds the red circle rate.

Employee Leaves Position

If an employee is moved to a position in a lower class as a result of management-initiated changes, he or she may receive a red circle rate provided he or she has a minimum of ten years’ State service (as calculated by the State Service and Seniority Unit at DPA) and the he or she has performed the duties of the higher class satisfactorily. The latter requirement is normally satisfied by the successful completion of a probationary period, unless there is compelling evidence to suggest otherwise.

Special Circumstance

An employee with nine years’ State service qualifies if the employee had been laid off or had been on a leave of absence for one or more years to reduce the effect of a layoff (see DPA Rule 599.608).

The red circle rate is terminated when the maximum salary of the class equals or exceeds the red circle rate or at the expiration of eligibility as defined below.

Duration of the Red Circle Rate

The length of a red circle rate resulting from a management-initiated change is based on length of State service. The length of a red circle rate is not prorated; that is, an employee with ten years’ service and an employee with 11.5 years’ service would receive, if authorized, red circle rates for exactly the same maximum period of time.

When Red Circle Rates are not Appropriate

Red circle rates are never appropriate in the following situations:

• Demotion in Lieu of Mandatory Transfer for Personal Convenience

  A demotion is for personal convenience if the employee had options other than layoff or demotion but chose demotion. Options would include transfers to different positions, units, or locations.

• Demotion to avoid adverse action or rejection on probation, demotion resulting from adverse action or rejection on probation.
• Demotion after reallocation of a position that was originally classified at an inappropriately high level, where there is no evidence the incumbent ever performed at the higher level.
• Voluntary demotion at the employee’s request for personal convenience, unless the request is made to avoid an involuntary geographic transfer.

Fiscally-Driven Layoffs and Red Circle Rates

Red circle rates are rarely authorized during fiscally-driven layoffs. DPA approval is required, and departments must provide detailed documentation proving that without the provision of red circle rates, additional employees would need to be laid off. This may occur in a department with a statewide layoff where large numbers of employees could elect geographic transfers that would accrue large relocation costs. In such a case, it might save money if those employees, or significant numbers of them, chose to remain in their current locations, demote, and receive red circle rates rather than transfer geographically.

Limited Red Circle Rates

There are times when the amount of a red circle rate should be limited. For example, when the reduction in salary would be more than five steps, a red circle rate of less than the current salary would be appropriate. Base the amount of the red circle rate on the length of time the employee spent at the higher salary. In extreme cases, it may be appropriate to establish a date upon which the red circle rate will decrease by a specified amount.

General Salary Increases

An employee receiving a red circle rate receives no salary increases until the maximum salary for the employee’s class exceeds the red circle rate. The amount of pay the employee receives above the maximum of the class is referred to as a “plus” adjustment. As general salary increases occur, and the maximum of the class moves upward toward the red circle rate, the “plus” adjustment becomes smaller.

Continuation of Original Red Circle Rates

Permanent Appointment of Employee to Another Class

An employee receiving a permanent appointment to another class with a maximum salary below the red circle rate shall continue to receive the red circle rate through the original expiration date.

Temporary or Limited-Term (LT) Appointment of Employee to Another Class

The original red circle rate expiration date of an employee accepting a temporary or LT appointment to another class remains in effect. For example, an employee receiving a red circle rate that is due to expire June 30, 2005 accepts an LT appointment to a class with a salary higher than the red circle rate on May 1, 2004. If the LT appointment terminates December 31, 2004, the red circle rate is reinstated until June 30, 2005.

Extension of Original Red Circle Rates

The only circumstance under which the expiration date of a red circle rate may be extended is when the employee leaves “pay status” during the eligibility period and mandatorily reinstates. In such a situation the red circle rate may be extended for the time the employee was off “pay status.”

Termination of Red Circle Rates

An employee’s red circle rate must be canceled when:

• The employee resigns or is separated from State service for cause. This means that the employee’s lump sum payment for accumulated leave credits is not calculated at the level of the red circle rate. (If the resignation or separation is not for cause, the payment for accumulated leave credits is calculated at the red circle rate up to the expiration date, as described in GC Section 19839(a).)
• The employee refuses a permanent appointment to a class in the same line of work with a maximum salary two or more steps higher than the employee’s current class, unless DPA finds that the refusal is reasonable.