HomeMy WebLinkAbout#16 - Administrator Severance AgreementLA515-1-918526.v1
STAFF REPORT
DATE: December 5, 2023
CONSENT
AGENDA ITEM: Authorize Payments to Former City Administrator pursuant to City Administrator Employment Agreement SUBMITTED BY: Sarah Sonsalla, City Attorney REVIEWED BY: Clarissa Hadler, Finance Director Karissa Goers, Administrative Services Director
ISSUES BEFORE COUNCIL: Should the City Council authorize payment of Ms. Handt’s severance in January of 2024 in two payments instead of a lump sum?
Should the City Council authorize payment of Ms. Handt’s deferred compensation during the
severance period? BACKGROUND:
Issue 1:
Section 3 of Kristina Handt’s Employment Agreement states that the City will pay Ms. Handt “a lump sum cash payment equal to six months aggregate salary…” It further states that the lump sum cash payment “shall be paid in accordance with Minnesota Statutes Section 465.722…”
Minnesota Statutes Section 465.722, subdivision 2 states that “[s]everance pay must be paid in a
manner mutually agreeable to the employee and the governing body of the local government unit over a period of not to exceed five years from retirement or termination of employment.” Ms. Handt has requested that her severance pay be made to her by the City in two payments in January of 2024. Because this request involves payment of Ms. Handt’s severance that is not in a lump
sum, Minnesota Statutes Section 465.722, subdivision 2 requires agreement by Ms. Handt and the
City Council. Issue 2:
The Employment Agreement requires the City to pay Ms. Handt a lump sum cash payment equal
to six months aggregate salary and “to continue to provide and pay for the benefits described in Section 10 for a period of six months…” The benefits described in Section 10 of Agreement include health, dental, and life insurance “along with other benefits as outlined in the City’s Personnel Policy and Employee Handbook.” Deferred compensation is not listed in Section 10 of
the Agreement but is listed separately in Section 6 of the Agreement. Section 6 of the Agreement
is silent on whether deferred compensation is to be paid throughout the six-month severance period. Ms. Handt has requested that the City pay its share of deferred compensation to her during the six month severance period.
LA515-1-918526.v1
Pursuant to Minnesota Statutes Section 465.22, subdivision 2, deferred compensation is not
excluded from severance pay. Deferred compensation is also included as a benefit outlined in the
City’s Personnel Policy and Employee Handbook. Therefore, there is a strong argument that it should be paid by the City as a benefit during the severance period. Because the Agreement is not clear, the City Council needs to authorize payment of deferred compensation during the severance period.
PROPOSAL DETAILS/ANALYSIS: The City is required to make the severance payment and pay Ms. Handt benefits for a period of six months from the date of the expiration of the Employment Agreement pursuant to Section 2
(A) of the Agreement.
FISCAL IMPACT: Paying the severance by making payments is beneficial to the City from a cash flow perspective.
The deferred compensation is equal to two percent of Ms. Handt’s annual salary. Therefore, six months of deferred compensation would be $2022.45. CITY COUNCIL ACTIONS PROPOSED: The City Council authorize paying Ms. Handt’s severance pay in two payments in January of 2024
instead of in a lump sum. The City Council authorize paying Ms. Handt’s deferred compensation during the six-month severance period.
If removed from the Consent Agenda, the language for motions for these actions are as follows: “Move to authorize payment of Kristina Handt’s deferred compensation during the six-month severance period.”
“Move to authorize payment of Ms. Handt’s severance pay in two payments in January of
2024.”
ATTACHMENTS: Employment Agreement