Chief Executive Officer Ted Fick resigned earlier this month amid a Washington State Auditor’s Office investigation into an alleged $4.8 million in potentially illegal payouts to port employees.
The Washington State Auditor’s Office (SAO) has ordered the Port of Seattle to review bonuses it found to have violated the terms of the state constitution, according to a statement from the auditor.
Port of Seattle CEO Ted Fick abruptly resigned earlier this month amid an investigation into the alleged $4.8 million in improper payouts.
“On Dec. 31, 2015, 642 non-represented employees received a one-time special payment, equal to 7 percent of annual salary, that ranged in amounts from $3,850 to $24,500 for a total expense to the port of $4,782,796,” the auditor’s office said in its report.
The port commission approved these one-time payments on the basis of improving employee morale and to attract and retain qualified employees as the workforce adjusted to a newly adopted 40-hour work week.
However, auditors found that 26 employees that received a total of $227,029 were already working a 40-hour work week prior to the change and, therefore should not have been eligible for the bonuses. In addition, the investigation found that six employees received higher payouts based on salary increases that took place after the bonuses were paid, and two more employees received the bonuses despite no longer working for the Port of Seattle at the time of payment.
As such, “The method in which the port executed this one-time payment constitutes extra compensation not allowed by the state constitution. The port did not establish performance standards or goals that exceeded normal employment requirements prior to the payment of the extra compensation as required by the state constitution,” the SAO said.
Because the port “violated the state constitution, and 642 employees received extra compensation to which they were not entitled,” the office recommended that Seattle “establish policies to ensure extra compensation payments are based on performance standards or goals as required by the state constitution,” and “conduct additional legal review to determine if any further actions, such as repayment, are necessary or required by state law.”
In response, the Port of Seattle said that although it respects the SAO’s recommendations, “had the one-time extra compensation been paid in installments, or if promises had been made by employees to stay in their job for a period of time, there would not have been an audit finding,” according to the auditor’s office.
“The port achieved the intended business outcome of retaining our dedicated employee talent pool,” it added. “Consideration was received in return for the one-time extra compensation. Despite significant employee concerns expressed in the waning months of 2015, the port achieved a 96 percent retention rate in 2016. We believe the one-time payment contributed to the overall retention rate.”
The port argued that given the broad authority granted to it by the Washington State Constitution, “The one-time payment was carefully tailored to meet constitutional requirements as understood by port counsel. The port intentionally identified the lump-sum payment as forward-looking, timed to address employees’ concerns and the port’s business goal of retaining high-performing employees. As discussed above, the port had clear business interests in making this one-time payment and, from the port’s perspective, achieved the stated intent. State law and port policy together establish and delegate authority for the implementation of commission actions to the CEO
Going forward, the port said it will review all policies and procedures related to extra compensation payments, including benchmarking itself against local government practices, noting how it will also take a number of measures to ensure greater overall transparency between the executive office and the commission going forward.
State auditors discovered the payments during a regularly scheduled accountability audit at the port, and briefed Port of Seattle executives on their findings during a private meeting just a few days before the announcement of Fick’s resignation.
State auditor finds Port of Seattle bonuses violated state constitution
