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Non-union 'at will' employees contracted out of schools

February 19, 2014 - By Meg Peters

Review Staff Writer

The Lake Orion Community School District has opted to contract LO Learning Support Staff (LSS) and other non-instructional positions through a third party agency.

The district hired Professional Educational Services Group (PESG), one of the largest educational staffing companies in the U.S. according to the website, to employ about 65 Lake Orion "at-will" employees.

This includes reading and math support teachers, computer technicians and office assistants who are not a member of a bargaining unit.

All substitute teachers and Lake Orion coaches are currently contracted through PESG.

Many LSS staff members work in elementary and middle school classrooms with students in small-group settings for additional teaching support.

Superintendent Marion Ginopolis said contracting out LSS and other at-will employees is not an effort to privatize, but to allow the district to maintain the current level of service provided by these positions because the district will no longer have to pay into at-will employee retirement.

"In other words, if we didn't go to PESG we would have to reduce service to those kids. We'd have to cut staff in that particular group because we can't afford to keep them all," Ginopolis said.

The district privatized their custodial cleaning services for the fiscal year 2012-13 under D.M. Burr Group based out of Flint, which Ginopolis stressed was nothing like this move.

"They [at-will employees] will have certain perks being employed through PESG. But we will have full control," Ginopolis said. "We hire, we evaluate these people. They're people we select. It's not like we would have no control like you would with privatization. It's very different," Ginopolis said.

At-will positions like these are tenuous, Ginopolis continued, because they are paid for with grants, or "soft money," which the district cannot count on from year to year.

Assistant Superintendent of Human Resources Bill Putney said the change won't feel any different.

"Relevant to the way we use them [PESG], they are more of a payroll service than anything else," Putney said. "They [at-will employees] will have every semblance of their Lake Orion existence except every two weeks their direct deposit will come from PESG and not from Lake Orion Community Schools."

Putney met with at-will employees at the beginning of last week to explain the new contract, and said a few employees were concerned with the switch.

Some of the concerns include losing retirement, sick days, and not being guaranteed the same payroll in the following fiscal year.

Putney said the district asked PESG to incentivize LSS and support staff with their present salaries.

Todd Hobson, Regional Director of Sales and Service for PESG, said school districts pay PESG employees the amount recommended by their district, which can fluctuate.

As for sick days, that is dependent on the district's instruction, he said.

"PESG does not, by policy, pay for time off. If a school district contracting a group through PESG wants PESG to include paid time off, then we will," Hobson said in a statement.

Existing laws regarding third-party contracting and pensions do not allow a retirement-roll over, Hobson said, so the current retirement plan employees were paying into freezes upon entering the contract.

Retirement costs are managed by the state. Lake Orion pays the Michigan Office of Retirement Services about 25.5 percent of each employee's salary in retirement costs. Each employee pays six percent individually to the same pot.

A Michigan school employee is not eligible to be vested in their retirement pension unless they have worked for a district for ten years. Upon freezing, they can either cash in their six percent they have been paying the state retirement agency, or wait until they are 65 years old to collect their pension.

"Our major reason for doing this is if you take the FICA contribution and the retirement contribution of the district, that is about 33.5 percent for every employee dollar being earned. When we go to PESG we will be paying 18 percent," Putney said. "The retirement contribution isn't rolling forward, but it's not sustainable for the district given our resources," he said.

Because LSS and other support positions will not be paying their six percent retirement costs several of them might even see a small wage increase, Putney said.

Putney said some of the perks of using PESG are that employees will have the option to contribute to a 401k, and pay into an affordable health care plan with a non-discriminatory model, which Lake Orion cannot offer.

"Everyone who has healthcare right now has almost identical health insurance, Putney said.

"The problem is, if I were an employee making $12 an hour, once I do the calculation on their wage, I can't offer that health insurance to them because it's not affordable for them per the guidelines of the Affordable Healthcare Act," Putney said. PESG can offer it, though.

Other benefits packages are available to PESG employees for purchase.  

PESG has the capacity to work with union employees, but thus far all of their contracts have been for non-affiliated employees, Hobson said.

"Our business grew very rapidly between 2007 and 2009 so by the time Right to Work became an issue we already had contracts that covered about 75% of the business in the state. We have picked up more since then but we did not see a noticeable increase as a result of Right to Work," Hobson said.

While outsourcing through PESG is a cost savings, Hobson continued, there are other reasons schools contract than for financial benefits.

"PESG relieves the human resources burden for the district for the employees who are contracted through us. We handle all of the recruiting, screening, training, workers' compensation, etc. which allows districts to concentrate on education rather than personnel issues," Hobson said in a statement.

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