Judge Orders O.C. to Rework Layoff Plan

SANTA ANA —  A federal judge on Friday ordered Orange County officials to negotiate with labor leaders to devise a layoff plan that takes into account the seniority rights of workers, offering hope that some of the 186 employees who got pink slips earlier this month may get their jobs back.

U.S. Bankruptcy Court Judge John E. Ryan ruled that the previously announced layoffs can go into effect, but only temporarily. He set another hearing on the matter for Feb. 2.

The judge agreed that the county’s unprecedented fiscal fiasco constitutes an emergency that allows voiding of labor agreements, but said that employee groups presented convincing evidence that layoffs could be made while honoring seniority.

“It’s only through communication that the employees can feel comfortable that everything is being done to preserve their rights,” Ryan said. “The association and the county have to get together immediately and review the (workers) who have been terminated to decide whether changes ought to be made.”

Dozens of anxious workers whose futures hung in the balance filled the benches of the courtroom behind a throng of lawyers so large they were given numbers to wear on their suits. As the judge issued his ruling, some who had been fired seemed upset with the continued uncertainty, but labor leaders welcomed it as a victory.

“On a scale of 1 to 10, I think he gave us an 8 1/2 plus,” said Bill Fogarty, of the Orange County Central Labor Council. “He told the county it had to sit down with us immediately. The 186 workers are still in limbo but I think their chances are a lot better than they were an hour ago. . . . Judge Ryan was courageous to do what he has done.”

Theresa Trotter, a county custodian, said she was disappointed that those who got layoff notices could not go back to work immediately, but was pleased that the county was told to meet with workers. “We want to be part of the process,” she said

In other developments Friday:

* A coalition of business leaders called for the restructuring of county government to increase the power of its top executive, and urged local agencies to avoid filing lawsuits. Three leaders--Arnel & Affiliates Chairman George Argyros, Irvine Co. Executive Vice President Gary Hunt and Pacific Mutual Life Insurance Co. Chairman Thomas C. Sutton--said they plan to convene meetings between county officials and those with money in the failed investment pool.

* Officials of the U.S. Securities and Exchange Commission, one of half a dozen agencies investigating the county’s financial debacle, grilled former Treasurer-Tax Collector Robert L. Citron for four hours.

Accompanied by attorney David W. Wiechert, a stone-faced Citron walked quickly into the SEC’s western regional headquarters in Los Angeles just before 10 a.m. Citron would not disclose what he planned to tell SEC officials.

* The county effectively completed the restructuring of its investment portfolio with the sale of $381.3 million in notes issued by the Student Loan Marketing Assn., known as Sallie Mae.

A day before, Sallie Mae had traded the fixed-rate notes to the county in exchange for an equivalent amount of its own derivative securities, some of the interest-rate-sensitive notes that had imperiled the county investment pool.

Friday’s auction and other smaller sales leaves the county with about $52 million in conventional securities from the original portfolio that county officials said do not need to be sold. The remainder of the pool is now invested in cash instruments with an average maturity of 10 days, down from four years at the time of the Dec. 6 bankruptcy filing. The overall yield on the reconstructed pool is 5.417%.

* Supervisor Marian Bergeson said she consulted with Gov. Pete Wilson’s office and now believes the state may come through with some indirect assistance to help Orange County with its budget debacle. Wilson and the Legislature are unlikely to provide direct aid, she said, but may relieve the county of some state-required expenses such as welfare payments.

* County bankruptcy attorney Bruce Bennett and lawyers for Merrill Lynch & Co. negotiated with U.S. District Judge Gary Taylor over whether the county’s lawsuit against the giant brokerage firm should land in Bankruptcy Court or federal district court.

Although Merrill’s attorneys have pushed for the case to be heard by a jury in district court, the county’s lawyers stated in court papers that “it is unlikely that this case will ever be tried to jury.” Taylor is expected to decide the matter next week.

In Bankruptcy Court on Friday, labor leaders argued that the county violated state law and workers’ constitutional rights, but saved only an incremental amount of money by laying off employees “willy-nilly” and voiding union contracts.

“They didn’t have to do it, it’s plain and simple. There were alternatives under the contract,” said Larry W. Gabriel, an attorney representing a coalition of 10 county unions. “They didn’t like the seniority provisions. They didn’t like the layoff procedure. They didn’t like the grievance procedure because it gave people the right to complain. So they said with one fell swoop: ‘Be gone.’ ”

Union attorneys said the county should follow layoff provisions in the contracts, which allow for both immediate firing of workers hired within six months and four-week furloughs without pay for any employee on just two days notice.

Labor groups also want the “bumping” process in their contracts to be observed. That would allow senior employees to move into lower-paid jobs, with the most junior employees being the ones to lose their jobs.

Attorneys asked that the county be ordered to comply with labor agreements not just for the workers who have already been given pink slips, but for any future layoffs. The county plans to slash another $80 million from its general fund budget in the year beginning July 1.

But county officials said that the procedures suggested by union officials take too much time, and that swift, targeted layoffs were the most effective way to ease Orange County’s massive cash shortfall, which is expected to be $172 million by June 30.

“Because the cash-flow liquidity crisis was an immediate one, delay was intolerable because delay meant cost,”’ said attorney Michael H. Goldstein, who represented the county. “The county had to take control of the crisis to show the markets that it knew what it was doing, that it had credibility, that it could move forward.”

Sheriff Brad Gates, who led the management council that developed the county’s first round of cuts and layoffs, also said any delay in imposing staff reductions would be detrimental.

“In the middle of riots, fires and floods, there are times when you have to walk past the person with the broken leg to get to the person who is bleeding to death,” Gates testified.

After the judge’s ruling, Gates said he was “not unhappy with the situation.”

“I believe he said the law allowed us to do what we did,” Gates said. “He wants communication and discussion. We have no objection to that.”

Union officials, however, said they believed the layoffs orchestrated by Gates’ council would be overturned.

“I heard the court say to the county that seniority is extremely important and complying with collective bargaining laws is extremely important,” said Marc Beilinson, an attorney for the labor coalition. “He does want give and take, but we strongly believe the give and take can be done within the four corners” of the contracts. Charles Axelrod, an attorney for the county, said he was optimistic that negotiations with labor leaders would yield a compromise. “While seniority seems to be important to the judge, it doesn’t seem to be a sacred cow,” he said.

Times staff writers Michael A. Hiltzik and Debora Vrana in Los Angeles and Greg Johnson, Matt Lait and Mark Platte in Orange County contributed to this report.