Office of GENERAL COUNSEL UNIVERSITY OF NEVADA, LAS VEGAS MEMORANDUM DATE: — March 30, 2017 UNLV TO: Sue Niehoff Chief of Staff, UNLV School of Dental Medicine FROM: _Debra L. Pieruschka, Esq. Assistant General Counsel ce: Karen West Dean, UNLV School of Dental Medicine Elda Sidhu General Counsel RE: Contract Payments: SDM Employee Incentive Payments Question: Can the School of Dental Medicine (“SDM”) make incentive payments to Dr. McAlpine when the GPR program is not producing “net income” as defined by the Addendum to Employment Document (“Agreement”)? (See Attached). Answer: No. SDM does not have the authority under the Agreement to award Dr. McAlpine incentive pay when he fails to meet the measurable standards identified in the Agreement approved by the Chancellor. Legal Analysis: The President has delegated authority from the Board of Regents for personnel matters and may delegate any of the duties of the office, unless expressly prohibited by Board policy. BOR Bylaws, Title 1, Article VIl, Section 4(c). While generally performance bonuses or commission are not permitted for NSHE professional staff, including academic faculty, the President of the institution may request, in limited cases and if approved by the Chancellor, that a professional staff member's employment contract include a bonus or commission. BOR Handbook, Title 4, Chapter 32, Section 25. BOR mandates that the performance bonus or commission “must be tied to specific measurable standards that are document in writing as part of the employment contract” and be “approved in advance” by the President and Chancellor BOR Handbook, Title 4, Chapter 32, Section 25, Subsection 5(a) and (a)(3). The BOR Handbook precludes the President from delegating his authority for performance bonus or commissions. BOR Handbook, Title 4, Chapter 32, Section 25, Subsection 5(a)(l). As such, all authority relating to any bonus, commission, and/or incentive is reserved to the President. UNLV Human Resources Signature Authority Delegations, dated June 18, 2015. As such, SDM is obligated to act in accordance with the approved terms and conditions of the Agreement,March 30, 2017 Page 2 of 3 The Agreement expressly mandates the following: © Employee meet Specific Objectives: increase clinical revenue, limit expenses while paying the bond installments on Bldg. D and making the rental payments for 1707 W. Charleston office, maintain a $17,000 reserve, and generate a surplus. See Addendum Document, #f 2 and 3. ‘Specific Business Purpose: to ensure the Program at least breaks even while paying both the bond installments and ALL other program expenses. See Addendum Document, $4. © Incentive Paid on Specific Terms: © Maximum Incentive: Dr. McAlpine would be eligible to receive a maximum incentive of $150,000. © Monthly Basis: The proposed incentive would be advanced 40% of his estimated maximum incentive of $150,000 ($5,000 per month). See Addendum Document, J 5. © Quarterly Evaluation: Dr. McAlpine would be eligible to receive the remaining 60% of the maximum incentive pay based on the program maintaining a $17,000 reserve, prorated quarterly, calculated after his incentive pay. See Addendum Document, 6. Actual financial statements will be updated quarterly and will be used to calculate Dr. M’s actual incentive salary. Employee Required to Repay: If the Program is in a deficit at the end of the fiscal year, the incentive salary advanced and unearned must be repaid by Dr. McAlpine in 12 equal payroll deductions from July 1 — June 30. See Addendum Document, 6. © UNLV Reservation of Right: UNLV reserves the right to cancel or amend the agreement with 30-day’s notice if the Program will not meet its goals. In fact, the Agreement calls out that if there is “no net profit,” than Dr. MeAlpine is ‘NOT entitled to any incentive payment. As here, if the employee's specific objectives are not achieved (i.e, there is “no net profit” no “reserve”), SDM is not authorized to pay the incentive pay. The Agreement expressly mandates that “[i]f the program is in a deficit at the end of the fiscal year...the incentive salary that has been advanced and uneamed will be repaid by Dr. McAlpine via ...equal payroll deductions.” See Addendum Document, 7. As such, any incentive payments under this agreement to any employee when there is no “net profit” would violate the express terms of the Agreement and improper. Based on SDM financial records since 2009 to present, the GPR Program has not generated any inet profit as defined by the Agreement. Under the terms of the Agreement, Dr. McAlpine was not and is not entitled to any incentive payments; and instead, he should have been required to pay back the “uneamed” advance incentive pay of $60,000 a year. Now, more than $460,000 in incentive overpayments have been paid to Dr. McAlpine, °March 30, 2017 Page 3 of 3 In sum, my legal opinion SDM needs to immediately address three issues. First, SDM should notify Dr. McAlpine that under the terms of the Agreement he is not entitled to further advance and/or incentive pay (either previously or currently) because he failed to meet the express Objectives of the agreement. Second, SDM must evaluate whether to continue with and/or modify the Agreement with Dr. McAlpine to minimize any risk of loss to SDM based on current program outcomes. Third, a discussion with Finance, Human Resources, and other key University personnel, including the President, needs to occur regarding the incentive overpayments to Dr. MeAlpine and any possible repayment and/or course of action as the President and Chancellor approved the Agreement.