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Bay Area school district accused of using employee wages to cover its employer obligations

Fremont Unified employees claim that for nearly 25 years, the district has deducted its health insurance obligation from the wages of at least 1,000 employees.

FREMONT, Calif. (CN) — A San Francisco Bay Area school district's employees claim they had no idea that for nearly 25 years their employer illegally deducted from their wages to cover annual costs toward their state health care plans rather than use district money as required.

A group of current and former employees have sued the Fremont Unified School District in Alameda County Superior Court seeking return of their wages. According to their attorney Dov Grunschlag, at least 1,000 people may have been affected, likely losing $10,000 to $25,000 each for nearly 25 years.

“These are teachers, administrators, custodians. Their salaries are not huge, and they depend on the paychecks to live on,” Grunschlag, who also represents Courthouse News in employment matters, said. 

According to the petition, in 1997 the district changed the way health care benefits were provided to certain employees who chose to enter into a contract with the state under the Public Employees’ Medical and Hospital Care Act. The law requires the district to make a minimum contribution for each covered employee, but the plaintiffs say it began deducting that amount from their pay.

“At no time were these deductions authorized by law, and at no time did petitioners or the class authorize the District to make the deductions,” the plaintiffs say in their petition.

They claim they were not aware of the districts’ actions until October 2021, when the Fremont Unified District Teachers Association and two other unions notified all members that they discovered the district was out of compliance with the Public Employees Medical and Hospital Care Act.

“FUSD has instead been passing that cost on to employees who are enrolled in health care plans,” the union wrote to its members at the time. “Instead of informing employee unions of the full scope of the violation, the district tried to get out of paying and avoid admitting fault.

This past August, the district and union circulated a settlement agreement noting the California Public Employees' Retirement System (CalPERS) told the district in July 2021 it had until the end of 2021 to rectify the situation and begin paying employer contributions out of its own pocket.

This agreement alerted employees to what was happening to their compensation, Grunschlag said.

“Until then, people just assumed the district was doing what legally was required,” he said. “They didn't know what was actually happening.”

The plaintiffs say that each year the state notifies the district about the total minimum contributions it must pay. They claim the district only acknowledged errors made between October 2017 to October 2018 but in reality has failed to return funds deducted since 1997. It is a violation of labor code to ask employees to sign a waiver of the right to full restoration of the funds withheld, which the plaintiffs say the district is requesting.

The plaintiffs claim the district is either hiding that it was deducting funds equivalent to the employer contribution from employee wages or failed to disclose that it was doing so, therefore “secretly paying a lower wage” while purporting to pay designated wages.

‘’The district seeks to avoid its clear, present, and ministerial duty by negotiating a settlement agreement requiring petitioners and class members who ‘opt in’ to accept a payment for unlawful deductions limited to four years; and to waive their right to any claim for interest,” the plaintiffs say in their petition. “By failing to restore even a portion of the lawful compensation of petitioners and the class without a waiver of claims beyond four years, the district has placed an unlawful condition on the payment of wages.”

They want a judge to order the district to report all funds it says were deducted from compensation, as well as class certification and an order to pay back the deductions with interest, from 1997 through 2021. They also want the district prohibited from making future unlawful deductions.

“The case has just begun, and we plan to amend shortly to allege PAGA claims,” Grunschlag said, referring to the Private Attorney General Act which has certain penalties under the labor code for violations only the state commissioner can collect. It authorizes aggrieved employees to sue to recover civil penalties on behalf of themselves, other employees and the state.

"Here, in addition to deducting funds that the employee was responsible for, they also deducted the amount they were responsible for," he said. "That in effect meant they were taking money from wages that they shouldn’t have.”

He said he has never seen a case of this kind before.

Neither the district nor the teachers’ union responded to multiple requests for comment by press time. 

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