REPORT TITLE:
Voluntary Separation


DESCRIPTION:
Provides early retirement and voluntary separation incentive
payments to workforce restructuring alternatives.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        803
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO WORKFORCE RESTRUCTURING.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1                   PART I.  FINDINGS AND PURPOSE
 
 2      SECTION 1.  The legislature finds that as the State enters
 
 3 the new millenium, the citizens of Hawaii require, demand, and
 
 4 deserve a government that is responsive, efficient, and flexible
 
 5 in order to address the everchanging needs of a modern society.
 
 6 In order to effectively provide for the requirements of the
 
 7 twenty-first century, state government must reinvent itself and
 
 8 the way it operates so that it will cost less, work better, and
 
 9 get measurable results.  As such, it is the objective of the
 
10 legislature to transform state government into an organization
 
11 that provides:
 
12      (1)  The best value for every taxpayer dollar;
 
13      (2)  The best service for each customer and regulated
 
14           business;
 
15      (3)  The best workplace for its employees; and
 
16      (4)  The best legacy for Hawaii's future.
 
17      In order to accomplish this objective, the legislature
 
18 believes that bold, innovative, and creative approaches must be
 
19 employed to ensure that a successful transformation occurs.
 

 
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 1      Since 1993, the federal government has piloted innovative
 
 2 personnel management practices to reduce the size of its
 
 3 workforce without adversely affecting public services or
 
 4 detrimental economic effects upon public employees.  By providing
 
 5 incentives to employees to volunteer to leave government
 
 6 employment, agencies have minimized or avoided costly and
 
 7 disruptive reductions in workforce actions.
 
 8      In October 1993, the Clinton Administration proposed
 
 9 legislation to provide employee buyout authority to non-defense
 
10 agencies.  This legislation, which became known as the Federal
 
11 Workforce Restructuring Act of 1994 (Public Law 103-226), and the
 
12 payment authority contained in the Omnibus Spending Bill for
 
13 fiscal year 1997 as the Voluntary Separation Incentive Payment
 
14 Authority (Public Law 103-208), provided agencies with a less
 
15 costly and disruptive tool for workforce restructuring.  The laws
 
16 not only allowed for the use of voluntary employee buyouts, but
 
17 incorporated safeguards which ensured that:
 
18      (1)  Buyouts made real and permanent reductions in the size
 
19           of the federal government; and
 
20      (2)  The buyout program not only saved taxpayer dollars, but
 
21           paid for itself without any additional appropriation of
 
22           funds.
 
23      Between March 30, 1994, the date of enactment of the Federal
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 Workforce Restructuring Act of 1994, and March 31, 1997, the date
 
 2 by which all separations were concluded, 39,900 non-defense
 
 3 employees took advantage of the voluntary buyouts, cutting excess
 
 4 layers of management and reducing overall federal employment
 
 5 levels.
 
 6      The United States Government Accounting Office concluded
 
 7 that over a five-year period, employee buyout actions that
 
 8 minimize bumping by senior employees generated over $60,000 more
 
 9 in net savings per each position vacated compared to reduction in
 
10 workforce actions.
 
11      Because of the success and effectiveness of separation
 
12 incentive programs, other agencies and departments have received
 
13 buyout authority to assist with major restructuring in the
 
14 federal workforce.
 
15      The purpose of this Act is to provide for a planned
 
16 reduction in the size of Hawaii's government and a framework for
 
17 the orderly restructuring of government programs.  This shall be
 
18 accomplished by providing the governor and the president of the
 
19 University of Hawaii with the authority and flexibility to
 
20 effectuate the necessary restructuring and streamlining of
 
21 government programs, services, and resulting personnel cost
 
22 reductions under their jurisdictions while concurrently providing
 
23 affected employees with economic assurances in the near term.
 

 
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 1 This Act shall be known as the Strategic Workforce Reduction and
 
 2 Government Reorganization Act.
 
 3                PART II.  GOVERNMENT REORGANIZATION
 
 4      SECTION 2.  Phased strategic workforce reduction plan.  (a)
 
 5 Prior to obligating any resources for voluntary separation
 
 6 incentive benefits, the respective director or head of all
 
 7 departments, and the University of Hawaii, shall submit to the
 
 8 legislature a strategic workforce reduction and reorganization
 
 9 plan outlining the intended use of the incentive benefits and a
 
10 proposed organizational chart for the department or the
 
11 University of Hawaii once all incentive benefits have been
 
12 conferred and the reorganization of the department or the
 
13 university has been completed.  The strategic plan shall include
 
14 but not be limited to:
 
15      (1)  The positions and functions to be reduced or
 
16           eliminated, identified by organizational unit,
 
17           geographic location, occupational category, and salary
 
18           level;
 
19      (2)  The number and amounts of voluntary separation
 
20           incentive payments to be offered;
 
21      (3)  A description of how the department or the University
 
22           of Hawaii will operate without the eliminated positions
 
23           and functions; and
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (4)  A review of its mission, programs, and operations for
 
 2           the explicit purpose of restructuring and downsizing
 
 3           the workforce in order to achieve the required
 
 4           reductions in general funding and positions.
 
 5      The strategic plan shall be designed to maximize the
 
 6 continuation of direct services to department or University of
 
 7 Hawaii clients and the public and to reduce middle management and
 
 8 supervisory layers of state government.  Departments and the
 
 9 University of Hawaii shall use the voluntary separation
 
10 incentives provided in this Act, subject to guidelines issued by
 
11 the departments of budget and finance and human resources
 
12 development, to the maximum extent possible.
 
13      (b)  To determine the positions, locations, and
 
14 organizational units to cover, the affected departments and the
 
15 University of Hawaii shall consider:
 
16      (1)  The overall objective of reducing supervisory layers,
 
17           reducing overhead positions and administrative jobs,
 
18           and other actions to improve productivity;
 
19      (2)  Which positions in a particular organization or
 
20           occupation are essential to accomplishing the
 
21           department's or the University of Hawaii's mission;
 
22      (3)  Whether replacing employees in positions in certain
 
23           geographic and organizational locations would be
 

 
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 1           difficult or costly;
 
 2      (4)  Whether the resulting vacancies would provide an
 
 3           opportunity for placement of other employees in surplus
 
 4           positions;
 
 5      (5)  Whether reassigned employees would be capable of
 
 6           assuming the duties of vacated positions without
 
 7           significant loss of productivity or the need for
 
 8           extensive retraining; and
 
 9      (6)  Whether the organization can afford the overall loss of
 
10           experience and the resulting adverse effect on mission
 
11           accomplishment that would result from the loss of
 
12           employees in certain occupational series and grade
 
13           levels or organizational/program components.
 
14      (c)  By September 30, 1999, each department shall submit
 
15 their draft strategic plans to the departments of budget and
 
16 finance and human resources development for review.  The
 
17 University of Hawaii shall submit its draft strategic plan to the
 
18 president of the University of Hawaii for review.  The president
 
19 of the University of Hawaii may utilize the services and
 
20 personnel of the departments of budget and finance and human
 
21 resources development when reviewing the draft strategic plans
 
22 under the president's jurisdiction.
 
23      (d)  By October 31, 1999, each department shall submit its
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 revised draft strategic plans to the governor for final review
 
 2 and approval.  The University of Hawaii shall submit its revised
 
 3 draft strategic plan to the president of the University of Hawaii
 
 4 for final review and approval.  Upon the approval by the governor
 
 5 or the president of the University of Hawaii, as applicable, of
 
 6 each agency's plan, the governor or the president of the
 
 7 University of Hawaii, as applicable, shall transmit the final
 
 8 strategic plans, draft legislation to approve the strategic
 
 9 plans, and draft legislation to implement any recommended
 
10 statutory amendments, to the legislature not later than
 
11 November 30, 1999.  If no legislation is required to implement
 
12 changes recommended in any final strategic plan, then the
 
13 legislature at a minimum, shall solicit public input and comment
 
14 prior to acting on any final strategic plan.
 
15      (e)  Any strategic plan or portion thereof shall be subject
 
16 to disapproval by the legislature by a majority vote of either
 
17 the senate or the house of representatives or by majority vote of
 
18 both in the 2000 regular session.  If no action to disapprove a
 
19 strategic plan or portion thereof is taken by March 1, 2000, the
 
20 strategic plan shall be deemed approved.
 
21      (f)  If the legislature does not disapprove of a
 
22 department's or the University of Hawaii's strategic plan, each
 
23 department and the University of Hawaii shall begin the
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 implementation of its strategic plan within one month after final
 
 2 approval by the legislature and may restructure and reorganize
 
 3 programs, redeploy employees in accordance with the approved
 
 4 strategic plan, and offer the benefits provided by this Act in
 
 5 order to expedite downsizing, eliminate redundancies, and
 
 6 streamline operations.  The voluntary separation incentives for
 
 7 employees who occupy the positions identified in a department or
 
 8 the University of Hawaii's strategic plan that are mandated under
 
 9 this section shall be initiated by April 1, 2000, and completed
 
10 by June 30, 2000.
 
11      (g)  Each department and the University of Hawaii shall
 
12 prepare an annual status report on the implementation of its
 
13 strategic plan, the actions taken and to be taken, and shall
 
14 include in the report the planned savings for each position
 
15 eliminated, the cost associated with each separation, and any
 
16 vacation payouts and traditional severance benefits conferred,
 
17 until the reorganization required under the strategic plan has
 
18 been completed.  If any other costs are associated with the
 
19 implementation of the strategic plan, information on these costs
 
20 shall also be included.
 
21      (h)  Departments and the University of Hawaii shall retain,
 
22 to the extent practicable, positions providing direct services in
 
23 adult corrections officer positions, or shortage category
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 positions in the department of public safety so as to not disrupt
 
 2 necessary or mandated public health and safety services.
 
 3        PART III.  VOLUNTARY SEPARATION INCENTIVE PROGRAMS
 
 4      SECTION 3.  Transitional severance benefits.  (a)  A
 
 5 permanent full-time employee whose position is specifically
 
 6 eliminated or eliminated as a result of any restructuring plan
 
 7 proposed by a department or the University of Hawaii in
 
 8 compliance with section 2 of this Act and not disapproved by the
 
 9 2000 legislature, shall be offered the opportunity to receive
 
10 transitional severance benefits in lieu of any rights to which
 
11 the employee may be entitled under reduction in workforce
 
12 policies, collective bargaining agreements, rules and procedures,
 
13 placement and bumping under collective bargaining agreements, or
 
14 special retirement incentives offered under section 4 of this
 
15 Act.  Transitional severance benefits shall be equivalent to:
 
16      (1)  Twelve weeks of salary if the employee has less than
 
17           three years of service; and
 
18      (2)  Twelve weeks plus one additional week of salary for
 
19           each full year of service over three years if the
 
20           employee has at three years or more of consecutive
 
21           service; provided that the transitional severance
 
22           benefit shall not exceed a maximum of twenty-one weeks
 
23           of salary or a maximum of $25,000, whichever is less.
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 The computation of years of service shall not include any annual
 
 2 or sick leave accumulated.
 
 3      (b)  Transitional severance benefits shall be computed and
 
 4 paid for by the terminating employee's department or the
 
 5 University of Hawaii, as applicable.  The terminating department
 
 6 or the University of Hawaii, as applicable, shall reduce its
 
 7 general funded personnel count by one full-time equivalent per
 
 8 each transitional severance benefit conferred, except as
 
 9 otherwise provided in section 4 of this Act.
 
10      (c)  Transitional severance benefits shall be in addition to
 
11 any payment owing to the employee for accumulated unused vacation
 
12 allowances under section 79-7, Hawaii Revised Statutes.  The
 
13 right of any employee who receives a transitional severance
 
14 benefit to also receive unemployment compensation shall not be
 
15 denied, abridged, or modified in any way due to receipt of the
 
16 transitional severance benefit.  Transitional severance benefits
 
17 shall be computed as of the employee's last day of service and
 
18 paid upon the employee's termination.
 
19      (d)  All transitional severance benefits payable pursuant to
 
20 this section shall be subject to applicable state laws and rules.
 
21      (e)  No transitional severance benefits shall be payable to
 
22 a state employee terminated for disciplinary reasons or reasons
 
23 other than a reduction in state government workforce.
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (f)  Transitional severance benefits provided under this Act
 
 2 shall not be considered as a part of a terminated employee's
 
 3 salary, service credit, or a collectively bargainable cost item
 
 4 when calculating retirement benefits, or sick or vacation leave.
 
 5      (g)  No employee who has received transitional severance
 
 6 benefits provided by this Act shall be reemployed by the State
 
 7 within five years of receiving the transitional severance
 
 8 benefits unless the gross amount of the transitional severance
 
 9 benefit is returned by the employee to the general fund prior to
 
10 the commencement of reemployment.  Exceptions for the temporary
 
11 hire of former employees without repayment of the transitional
 
12 severance benefit may be made on a case-by-case basis with the
 
13 prior approval of the governor, or the president of the
 
14 University of Hawaii, as applicable, for undue economic hardship
 
15 reasons only.
 
16      (h)  No employee in a position deemed by a department or
 
17 agency head to be essential under section 2(b)(2) shall
 
18 participate in the transitional severance benefits program
 
19 provided under this section unless the employee agrees to the
 
20 terms set forth in section 6.
 
21      (i)  All positions held by employees who are provided
 
22 transitional severance benefits shall be abolished upon the
 
23 termination of the employee and all funds allocated for the
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 salary of the position shall be returned to the general fund or
 
 2 the special fund from which the position is funded, as
 
 3 applicable, after the deduction of amounts sufficient to cover
 
 4 the transitional severance benefits and the accumulated vacation
 
 5 leave of the employee who occupied the position.
 
 6      SECTION 4.  Retirement program.  (a)  An employee whose
 
 7 position is specifically eliminated or eliminated as a result of
 
 8 any restructuring plan proposed by a department or the University
 
 9 of Hawaii in compliance with section 2 of this Act and not
 
10 disapproved by the 2000 legislature, may elect, if the employee
 
11 is a vested member of the employees' retirement system and meets
 
12 any of the criteria specified in subsection (e), the special
 
13 retirement benefits provided by this section in lieu of
 
14 exercising any rights to which they may be entitled under
 
15 reduction in workforce policies, collective bargaining
 
16 agreements, rules and procedures, placement and bumping under
 
17 collective bargaining agreements, or receiving the transitional
 
18 severance pay benefits provided in section 3 of this Act.  To
 
19 receive the special retirement benefits offered under this
 
20 section, the employee must comply with the notice and effective
 
21 date requirements specified in subsections (b) and (c).
 
22      (b)  All employees whose positions are eliminated by section
 
23 2 of this Act who elect to retire and receive the benefits of
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 this Act shall notify their employing departments or the
 
 2 University of Hawaii, as applicable, by May 1, 2000, and file
 
 3 formal applications for retirement that will commence not less
 
 4 than thirty days nor more than ninety days prior to the date of
 
 5 retirement.
 
 6      (c)  All employees whose positions are eliminated pursuant
 
 7 to section 2 of this Act and who elect to retire pursuant to this
 
 8 Act, except those in bargaining units 5 and 7, shall retire on or
 
 9 prior to December 31, 2000.  Employees whose positions are
 
10 eliminated by a department or the University of Hawaii's
 
11 compliance with section 2 of this Act, and those employees who
 
12 are in bargaining units 5 and 7, shall have until June 30, 2001,
 
13 to retire.
 
14      (d)  A one-time early retirement service credit of two
 
15 additional years under chapter 88, Hawaii Revised Statutes, shall
 
16 be provided to affected employees whose positions are
 
17 specifically eliminated or eliminated as a result of a department
 
18 or the University of Hawaii's compliance with section 2 of this
 
19 Act.
 
20      (e)  Notwithstanding the age and length of service
 
21 requirements of section 88-73, Hawaii Revised Statutes, a member
 
22 shall qualify under subsection (d), exclusive of the bonus
 
23 provided in subsection (d), under one of the following:
 

 
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 1      (1)  The member is at least fifty years of age and has at
 
 2           least ten years of credited service as a contributory
 
 3           class A or B member as of December 31, 1999;
 
 4      (2)  Irrespective of age, the member has at least twenty
 
 5           years of credited service as a contributory class A or
 
 6           B member as of December 31, 1999;
 
 7      (3)  The member is at least fifty-seven years of age and has
 
 8           at least ten years of credited service as a
 
 9           noncontributory class C member as of December 31, 1999;
 
10      (4)  Irrespective of age, the member has at least
 
11           twenty-five years of credited service as a
 
12           noncontributory class C member as of December 31, 1999.
 
13      (f)  The additional service credit shall not increase the
 
14 amount of total credited service or retirement allowance of the
 
15 member beyond any maximum limitation on service credit or
 
16 retirement allowance established by chapter 88, Hawaii Revised
 
17 Statutes.
 
18      (g)  The member shall forfeit the additional service credit
 
19 and any other benefit provided by chapter 88, Hawaii Revised
 
20 Statutes, that was based on the early retirement bonus upon
 
21 subsequent reentry into the employees' retirement system.
 
22      (h)  Notwithstanding subsections (c) and (g), the department
 
23 of education, upon the recommendation of an individual school or
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 school complex, may rehire former educational officer or
 
 2 instructional resource personnel on a contractual basis to be
 
 3 utilized as the school or school complex deems appropriate;
 
 4 provided that any position filled pursuant to this subsection
 
 5 shall not exceed forty per cent of a full-time equivalent.  This
 
 6 subsection shall be repealed on June 30, 2004.
 
 7      (i)  The heads of the affected department and the University
 
 8 of Hawaii shall transmit a list to the board of trustees of the
 
 9 employees' retirement system by June 1, 2000, of participants
 
10 whose positions are eliminated by section 2 of this Act.
 
11 Agencies that employ members of units 5 or 7 who wish to
 
12 participate in the retirement program provided under this section
 
13 shall transmit a list of participants to the board of trustees of
 
14 the employees' retirement system by September 30, 2000, for
 
15 participants whose positions are eliminated by section 2 of this
 
16 Act.
 
17      (j)  No employee who is eligible to retire without penalty
 
18 or eligible to retire pursuant to this section shall be eligible
 
19 for the transitional severance benefits offered under section 3
 
20 of this Act.
 
21      (k)  Any employee who exercises the option of early
 
22 retirement pursuant to this section but who does not qualify with
 
23 respect to the age and length of service requirements under
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 section 88-73, Hawaii Revised Statutes, to receive a retirement
 
 2 benefit without penalty, shall not have their retirement benefit
 
 3 reduced in accordance with the actuarial formula normally used by
 
 4 the employees' retirement system for the calculation of early
 
 5 retirement benefits.
 
 6      (l)  No employee in a position deemed by a department or
 
 7 agency head to be essential under section 2(b)(2) shall
 
 8 participate in the early retirement program provided under this
 
 9 section unless the employee agrees to the terms set forth in
 
10 section 6.
 
11      (m)  All positions affected by the retirement of an employee
 
12 pursuant to this section shall be abolished.  All amounts
 
13 allocated for positions vacated and abolished pursuant to this
 
14 section shall be returned to the general fund or to the special
 
15 fund from which the employee's position is funded, as applicable,
 
16 upon the retirement of the employee and after the deduction of
 
17 amounts sufficient to cover the department or the University of
 
18 Hawaii's costs associated with the retiring employee's special
 
19 retirement benefits and accumulated vacation leave.  Each
 
20 department affected by the special retirement program authorized
 
21 by this section and the University of Hawaii shall reduce its
 
22 general funded personnel count by one full-time equivalent per
 
23 each special retirement benefit conferred.  Each department and
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 the University of Hawaii shall forward a report on the positions
 
 2 affected to the directors of finance and human resources
 
 3 development.  The director of finance shall report this
 
 4 information to the legislature no later than twenty days prior to
 
 5 the convening of the regular session of 2001.
 
 6                PART IV.  MISCELLANEOUS PROVISIONS
 
 7      SECTION 5.  The board of trustees of the employees'
 
 8 retirement system shall make payments with respect to all
 
 9 eligible employees who retire pursuant to section 4 of this Act.
 
10      The board shall determine the amount equal to the actuarial
 
11 present value of the difference between allowances members
 
12 receive after the receipt of service credit under section 4 of
 
13 this Act and the allowances members would have received without
 
14 two years of additional service credit.  The board shall also
 
15 determine the portion of the additional actuarial present value
 
16 of benefits to be charged to the State and to each county, based
 
17 on retirements during the early retirement incentive bonus
 
18 period.  The State shall make additional payments to the
 
19 employees' retirement system in the amounts required to liquidate
 
20 the additional actuarial present value of benefits over a period
 
21 of five years beginning January 1, 2001.
 
22      SECTION 6.  (a)  Notwithstanding sections 3(i) and 4(m) of
 
23 this Act, a position shall not be abolished if the respective
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1 head of each department or agency affected by this Act:
 
 2      (1)  Establishes a mentoring agreement with employees who
 
 3           would otherwise qualify for retirement or transitional
 
 4           severance benefits under this Act; and
 
 5      (2)  Deems that the employee's retention is essential as
 
 6           determined under section 2(b)(2) to ensure that direct
 
 7           services to the public are not adversely affected.
 
 8      The employee shall agree to train a replacement within six
 
 9 months prior to the employee's voluntary separation under section
 
10 3 or 4 of this Act.  The training provided shall not be subject
 
11 to any collective bargaining agreement and shall be conducted
 
12 without any additional compensation or consideration for either
 
13 the trainer or the trainee.  Upon the completion of the training
 
14 of the replacement employee, the employee requesting voluntary
 
15 separation shall be allowed to participate in the voluntary
 
16 separation programs provided in sections 3 and 4, as appropriate.
 
17      (b)  For essential employees who agree to the terms set
 
18 forth in this section, the implementation deadline contained in
 
19 section 2(f) and the notification and retirement deadlines
 
20 contained in section 4(b) and (c), may be extended to accommodate
 
21 for the training of replacement employees pursuant to this
 
22 section; provided that any extension granted under this
 
23 subsection shall be granted only for the purposes of training
 

 
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 1 replacement employees and in no case shall exceed six months from
 
 2 the dates set forth in sections 2(f) and 4(b) and (c),
 
 3 respectively.
 
 4      SECTION 7.  The department of human resources development,
 
 5 in cooperation with the employees' retirement system, shall
 
 6 provide briefings prior to the implementation of any strategic
 
 7 workforce reduction plan to educate the employees whose positions
 
 8 have been eliminated pursuant to section 2 of this Act.
 
 9      SECTION 8.  The mayor of a county with the approval of the
 
10 county council, may exercise discretion with respect to
 
11 participation in the retirement program set forth in section 4 of
 
12 this Act if a voluntary separation program is initiated in that
 
13 county; provided that a list of special retirement participants
 
14 shall be transmitted to the board of trustees of the employees'
 
15 retirement system by May 1, 2000.  Each participating county
 
16 shall be charged its portion of additional actuarial present
 
17 value of benefits as determined by the board.
 
18      SECTION 9.  If any provision of this Act, or the application
 
19 thereof to any person or circumstance is held invalid, the
 
20 invalidity does not affect other provisions or applications of
 
21 the Act which can be given effect without the invalid provision
 
22 or application, and to this end the provisions of this Act are
 
23 severable.
 
24      SECTION 10.  This Act shall take effect upon its approval.