In preparing an Employment Law Overview course for the SBDC, I put together a list of laws by company size. I am just going to list the laws here, without any in-depth information on each law.
From 1 to 14 Employees:
- Fair Labor Standards Act (FLSA)
- Immigration Reform & Control Act (IRCA)
- Employee Polygraph Protection Act
- Uniformed Services Employment & Re-employment Rights Act (USERRA)
- Equal Pay Act
- Consumer Credit Protection Act
- National Labor Relations Act (NLRA)/Wagner Act
- Labor-Management Relations Act (Taft-Hartley)
- Employee Retirement Income Security Act (ERISA) - if you offer benefits
- Uniform Guidelines of Employee Selection Procedures
- Federal Insurance Contributions Act (FICA)
- Occupational Health and Safety Act
From 15 - 19 Employees, add the following laws:
- Title VII of the Civil Rights Act
- Title I, Americans with Disabilities Act (ADA) as amended by the ADAAA
- Pregnancy Discrimination Act
- Fair Credit Reporting Act (FCRA)
- Fair and Accurate Credit Transactions Act (FACTA)
From 20 - 49 Employees, add the following laws:
- Age Discrimination in Employment Act (ADEA)
- Consolidated Omnibus Budget Reconciliation Act (COBRA)
From 49 to 99 Employees, add the following laws:
- Family and Medical Leave Act (FMLA)
For 100 or more Employees, add the following laws:
- Worker Adjustment & Retraining Notification Act (WARN)
- EEO-1 Report must be filed annually
And for those who are federal contractors:
- EEO-1 Report filed annually with 50+ employees and a federal contract for more than $50,000
- Executive Orders 11246, 11375, 11478
- Vocational Rehabilitation Act
- Drug Free Workplace
- Vietnam-Era Veterans Adjustment Act
- Davis Bacon Act
- Copeland Act
- McNamara-O'Hara Service Contract Act
- Walsh-Healy Act
The Take Away:
Employers have to abide by many regulations, and ignorance does not create a safe harbor. It is important to be aware of and to abide by the requirements of these laws. The cost of violation will prove exorbitant when compared to the cost of compliance.
By way of a brief example, I audited a company's I-9 files (IRCA compliance). On four forms, I found 14 errors. This equates to about $1,400 in liability.
Thursday, July 21, 2011
Wednesday, July 20, 2011
Vicarious Liability for Harassment and Discrimination
I was preparing a training on employment law (future blog post) and started thinking about the concept of vicarious liability as it relates to harassment. The result is this post.
What is Vicarious Liability?
To put it in simple terms that relate to business, vicarious liability is the idea that a company can be held liable for the actions, or lack of action, of employees and managers.
An easy example: an employee driving on company business gets in a wreck and kills someone. The company may become vicariously liable for the incident and thus be sued. Note: It is worth getting a driving record on any individual who will be driving for your company before allowing him or to drive, even if just to pick up lunch for the office.
Perhaps less dramatic than a car wreck, vicarious liability can also be asserted when a manager violates employment law by discriminating against workers or creating a hostile work environment. While less dramatic, this scenario is more likely and creates significant liability. The manager is given actual authority by the company and utilizes that authority in his or her daily actions. As the company gives the manager authority, the manager is an agent of the company.
Basis for Vicarious Liability:
As a general rule, a principal (the company) is liable for the actions of its agents (the managers). Worse, some individuals in the company may have apparent authority. Even if their positions are not expressly given authority, if it appears they are agents of the company, liability may exist.
For now, let's focus on what companies can do to reduce or prevent liability as it relates to harassment and discrimination.
The Supreme Court ruled (Burlington Industries, Inc. v. Ellerth and Faragher v. City of Boca Raton) that employers are subject to vicarious liability for unlawful harassment by supervisors. The standard derived from these decisions is based on two principles:
1. An employer is responsible for the acts of its supervisors.
2. Employers should be encouraged to prevent harassment, and employees should be encouraged to avoid or limit the harm from harassment.
Avoiding or Limiting Liability:
Of course, there is no way a business owner can be expected to prevent all harassment and discrimination. The mere fact that a business owner has managers and supervisors indicates an inability to be in all places at the same time. In recognition of this fact, the Supreme Court has indicated that so long as the harassment and/or discrimination does not result in a tangible employment action (termination for example), then the employer may avoid liability or at least limit the amount of liability if the following is true:
1. The company exercised reasonable care in trying to prevent harassment (training, reporting mechanisms for employees) and promptly corrects any harassing behavior of which it is aware.
2. The employee unreasonably failed to take advantage of any opportunities provided by the employer to prevent or avoid harm, such as using reporting mechanisms.
If the harassment/discrimination results in a tangible employment action, or the tangible employment action appears to be caused by the harassment/discrimination, then the company will always face liability. The only solution for this is a review of all employment actions to ensure proper documentation of the reason for the action and to ensure that the action is consistent with other actions taken by the manager. This will not always prevent liability, but it will provide a defense when accusations of harassment are baseless.
The Take Away:
The first step in reducing the amount of liability the company has is to draft an anti-harassment and anti-discrimination policy. "EEOC Enforcement Guidance: Vicarious Employer Liability for Unlawful Harassment by Supervisors," advises that an anti-harassment/anti-discrimination policy should include the following:
• A clear explanation of prohibited conduct;
• Assurance that employees who make complaints of harassment or provide information related to such complaints will be protected against retaliation;
• A clearly described complaint process that provides accessible avenues of complaint;
• Assurance that the employer will protect the confidentiality of harassment complaints to the extent possible;
• A complaint process that provides a prompt, thorough, and impartial investigation; and
• Assurance that the employer will take immediate and appropriate corrective action when it determines that harassment has occurred.
(http://www.eeoc.gov/policy/docs/harassment.html)
Beyond the policy, orientation, training, re-training (annually), and most importantly taking measures to correct issues (investigations and follow-ups) are necessary to help reduce the company's liability.
Of course, this is short treatment on a big subject. Employers with more than 14 employees are subject to Title VII (race, color, religion, national origin, gender), ADA (disability), and the Pregnancy Discrimination Act. Employers with 20 or more employees can add ADEA (age).
HR Consult Team can help reduce your company's liability by completing an audit of your current practices, creating or revising your handbook, and providing training for your managers, supervisors, and employees.
Works Cited:
http://www.eeoc.gov/policy/docs/harassment.html
What is Vicarious Liability?
To put it in simple terms that relate to business, vicarious liability is the idea that a company can be held liable for the actions, or lack of action, of employees and managers.
An easy example: an employee driving on company business gets in a wreck and kills someone. The company may become vicariously liable for the incident and thus be sued. Note: It is worth getting a driving record on any individual who will be driving for your company before allowing him or to drive, even if just to pick up lunch for the office.
Perhaps less dramatic than a car wreck, vicarious liability can also be asserted when a manager violates employment law by discriminating against workers or creating a hostile work environment. While less dramatic, this scenario is more likely and creates significant liability. The manager is given actual authority by the company and utilizes that authority in his or her daily actions. As the company gives the manager authority, the manager is an agent of the company.
Basis for Vicarious Liability:
As a general rule, a principal (the company) is liable for the actions of its agents (the managers). Worse, some individuals in the company may have apparent authority. Even if their positions are not expressly given authority, if it appears they are agents of the company, liability may exist.
For now, let's focus on what companies can do to reduce or prevent liability as it relates to harassment and discrimination.
The Supreme Court ruled (Burlington Industries, Inc. v. Ellerth and Faragher v. City of Boca Raton) that employers are subject to vicarious liability for unlawful harassment by supervisors. The standard derived from these decisions is based on two principles:
1. An employer is responsible for the acts of its supervisors.
2. Employers should be encouraged to prevent harassment, and employees should be encouraged to avoid or limit the harm from harassment.
Avoiding or Limiting Liability:
Of course, there is no way a business owner can be expected to prevent all harassment and discrimination. The mere fact that a business owner has managers and supervisors indicates an inability to be in all places at the same time. In recognition of this fact, the Supreme Court has indicated that so long as the harassment and/or discrimination does not result in a tangible employment action (termination for example), then the employer may avoid liability or at least limit the amount of liability if the following is true:
1. The company exercised reasonable care in trying to prevent harassment (training, reporting mechanisms for employees) and promptly corrects any harassing behavior of which it is aware.
2. The employee unreasonably failed to take advantage of any opportunities provided by the employer to prevent or avoid harm, such as using reporting mechanisms.
If the harassment/discrimination results in a tangible employment action, or the tangible employment action appears to be caused by the harassment/discrimination, then the company will always face liability. The only solution for this is a review of all employment actions to ensure proper documentation of the reason for the action and to ensure that the action is consistent with other actions taken by the manager. This will not always prevent liability, but it will provide a defense when accusations of harassment are baseless.
The Take Away:
The first step in reducing the amount of liability the company has is to draft an anti-harassment and anti-discrimination policy. "EEOC Enforcement Guidance: Vicarious Employer Liability for Unlawful Harassment by Supervisors," advises that an anti-harassment/anti-discrimination policy should include the following:
• A clear explanation of prohibited conduct;
• Assurance that employees who make complaints of harassment or provide information related to such complaints will be protected against retaliation;
• A clearly described complaint process that provides accessible avenues of complaint;
• Assurance that the employer will protect the confidentiality of harassment complaints to the extent possible;
• A complaint process that provides a prompt, thorough, and impartial investigation; and
• Assurance that the employer will take immediate and appropriate corrective action when it determines that harassment has occurred.
(http://www.eeoc.gov/policy/docs/harassment.html)
Beyond the policy, orientation, training, re-training (annually), and most importantly taking measures to correct issues (investigations and follow-ups) are necessary to help reduce the company's liability.
Of course, this is short treatment on a big subject. Employers with more than 14 employees are subject to Title VII (race, color, religion, national origin, gender), ADA (disability), and the Pregnancy Discrimination Act. Employers with 20 or more employees can add ADEA (age).
HR Consult Team can help reduce your company's liability by completing an audit of your current practices, creating or revising your handbook, and providing training for your managers, supervisors, and employees.
Works Cited:
http://www.eeoc.gov/policy/docs/harassment.html
Tuesday, June 21, 2011
Compensation Compilation
Today's post is a compilation of some interesting points from compensation articles I read on SHRM online.
Let's start at the top.
Executive Pay:
Stephen Miller's article regarding executive pay entitled Big Jump in Executive Pay, Proxy Statements Show references a Wall Street Journal/Hay Group 2010 CEO Compensation Study, which indicates that executive compensation jumped 11% in 2010. The majority of this increase was based upon a large increase in annual incentives (19.7%).
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/CEOPayJump.aspx)
In April of 2011, Miller wrote about a Towers Watson analysis of executive pay which indicated the following:
• The median total cash compensation, which includes base salary as well as annual and discretionary bonus payments, increased 17% for CEOs in 2010 vs. a 3% median increase in 2009.
• Total direct compensation, which includes total cash compensation plus the grant value of long-term incentives, including stock options, restricted stock and long-term performance plans, increased 9% in 2010 vs. a decrease of 1% in 2009.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/CEOCompRebound.aspx)
Miller contrasts this with a Hewitt Associates survey that indicates that the average employee increase was 2.4% in 2010. The point is clear: executive compensation is on the rise.
Employee Wage Increases:
Miller's article from May cites a survey by Buck Consultants (Reviving and Inspiring the Workforce: 2011 Compensation Trends Survey) which indicates that there is a thawing of wage freezes (down to 9% of respondents from 48%) and an increase in average wage increase budgets from 2.2% at the beginning of 2010 to 3%.
Some companies are putting emphasis on pay-for-performance to help maximize the investment. This includes the use of bonuses. The largest portion of organizations (44%) indicated they expect to pay out bonuses that are at least 5% higher than the bonuses paid in 2010. An additional 31% indicates that the bonus payments will be within 5% of the 2010 bonus amounts.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/2011Pay.aspx)
(https://www.bucksurveys.com/BuckSurveys/popup.aspx?src=/BuckSurveys/Portals/0/aspdnsf/images/Product/large/87.jpg)
Salary is Top Cause of Dissatisfaction:
The majority of workers (47%) indicate that salary is cause of their dissatisfaction with their jobs. The next largest group is dissatisfied with their work load (24%), according to a SHRM online article.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/Dissatisfaction.aspx)
Pay Differences:
Employers can legitimately vary pay on a number of factors, such as location, position, and experience. A Culpepper and Associates article references the Culpepper Geographic Pay Differential Practices Survey findings, which indicate:
Of companies with geographic pay differentials:
• 86 percent use salary surveys (i.e., cost of labor) to determine geographic pay differentials.
• 69 percent adjust compensation by creating separate salary structures for various locations.
• 65 percent use data for individual cities to determine geographic pay differentials.
• 59 percent review their differentials annually.
(http://www.shrm.org/hrdisciplines/benefits/Articles/Pages/GeoDifferentials.aspx)
However, employers may NOT vary pay on protected characteristics such as age, gender, religion, race, or color. Despite this fact, Miller's article from March 2011 refers to the White House report titled Women in America: Indicators of Social and Economic Well-Being , which points out that in 2009 women earned about 75% of what their male counterparts earned. This variance held at all levels of education, but the inequities are even more problematic for women of color.
In some ways this is good news; in 1979 women earned about 62% of what men earned. Still, it shows there is a long way to go before we reach the point of equity. A promising trend is revealed by the fact that in the age group of 24 - 34 year olds, women earn 89% of what men make.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/WageGap.aspx)
The Use of Carve-Outs for Pay for Performance:
So, with less money to go around, how do we make the most of it?
Jim Kochanski and Robin Kegerise of Sibson Consulting wrote an article for SHRM that explains the use of Carve-Outs when budgeting to help support a pay-for-performance compensation model. For example, if an organization is planning on a 3% overall wage increase, 2.5% is set aside for average or high performers, with the additional .5% is reserved for merit pay for top performers.
The article suggests that the carve-out approach works because it creates a mind-set during several parts of the business cycle, such as budgeting, communicating and setting expectations, evaluating performance, and delivering differentiated rewards. One example the article gives is that a standard 3% increase often sets the expectation that all employees will get 3%. By setting the standard increase at 2.5% then allotting the additional .5% for top performers, the organization sets new expectations for employees and creates incentive for each employee to be a top performer.
The article also urges companies to take the step of being honest in communicating to employees. For example, there is no requirement that all money budgeted for increases be spent. If employees are not performing to standards, then they will receive less than the average budgeted increase.
The method of performance evaluation and the metrics used are very important when utilizing a carve-out approach. It is important to align employee objectives with company goals. When the metrics are aligned, then employee performance should have a substantial effect on company performance.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/Carve-Outs.aspx)
Money is Not the Only Motivator:
Miller quotes Daniel Pink in an article from May of this year to make a point about compensation. Pink argues that "people are not coin-operated."
Pink goes on to say that, "people have more sophisticated needs. Human beings are profoundly attuned to the norm of fairness." He advises that employers "pay people enough to take money off the table" and "focus on the work, not the money," to motivate employees. He implores companies that employees cannot be controlled into being engaged and suggests that greater autonomy can lead to increased engagement, productivity, and profitability.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/PinkMoney.aspx)
The Take Away:
Executive compensation is increasing at significant rates. Employee compensation is increasing as well but not nearly as quickly as executive compensation.
While the majority of companies utilize geographic location as a basis for variances in pay, which is legal, there remains a large gap between the wages of female and male workers. The good news is that the gap is decreasing and that the gap is smaller for younger workers (25-34 year olds).
Companies can utilize Carve-Out plans to make better use of their allotted increases by earmarking a portion of the budgeted overall increase to be used for top performers. Similarly, Pink urges companies to remember that money is not the only way to motivate and engage employees.
Works Cited:
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/CEOPayJump.aspx
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/CEOCompRebound.aspx
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/2011Pay.aspx
https://www.bucksurveys.com/BuckSurveys/popup.aspx?src=/BuckSurveys/Portals/0/aspdnsf/images/Product/large/87.jpg
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/Dissatisfaction.aspx
http://www.shrm.org/hrdisciplines/benefits/Articles/Pages/GeoDifferentials.aspx
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/WageGap.aspx
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/Carve-Outs.aspx
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/PinkMoney.aspx
Let's start at the top.
Executive Pay:
Stephen Miller's article regarding executive pay entitled Big Jump in Executive Pay, Proxy Statements Show references a Wall Street Journal/Hay Group 2010 CEO Compensation Study, which indicates that executive compensation jumped 11% in 2010. The majority of this increase was based upon a large increase in annual incentives (19.7%).
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/CEOPayJump.aspx)
In April of 2011, Miller wrote about a Towers Watson analysis of executive pay which indicated the following:
• The median total cash compensation, which includes base salary as well as annual and discretionary bonus payments, increased 17% for CEOs in 2010 vs. a 3% median increase in 2009.
• Total direct compensation, which includes total cash compensation plus the grant value of long-term incentives, including stock options, restricted stock and long-term performance plans, increased 9% in 2010 vs. a decrease of 1% in 2009.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/CEOCompRebound.aspx)
Miller contrasts this with a Hewitt Associates survey that indicates that the average employee increase was 2.4% in 2010. The point is clear: executive compensation is on the rise.
Employee Wage Increases:
Miller's article from May cites a survey by Buck Consultants (Reviving and Inspiring the Workforce: 2011 Compensation Trends Survey) which indicates that there is a thawing of wage freezes (down to 9% of respondents from 48%) and an increase in average wage increase budgets from 2.2% at the beginning of 2010 to 3%.
Some companies are putting emphasis on pay-for-performance to help maximize the investment. This includes the use of bonuses. The largest portion of organizations (44%) indicated they expect to pay out bonuses that are at least 5% higher than the bonuses paid in 2010. An additional 31% indicates that the bonus payments will be within 5% of the 2010 bonus amounts.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/2011Pay.aspx)
(https://www.bucksurveys.com/BuckSurveys/popup.aspx?src=/BuckSurveys/Portals/0/aspdnsf/images/Product/large/87.jpg)
Salary is Top Cause of Dissatisfaction:
The majority of workers (47%) indicate that salary is cause of their dissatisfaction with their jobs. The next largest group is dissatisfied with their work load (24%), according to a SHRM online article.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/Dissatisfaction.aspx)
Pay Differences:
Employers can legitimately vary pay on a number of factors, such as location, position, and experience. A Culpepper and Associates article references the Culpepper Geographic Pay Differential Practices Survey findings, which indicate:
Of companies with geographic pay differentials:
• 86 percent use salary surveys (i.e., cost of labor) to determine geographic pay differentials.
• 69 percent adjust compensation by creating separate salary structures for various locations.
• 65 percent use data for individual cities to determine geographic pay differentials.
• 59 percent review their differentials annually.
(http://www.shrm.org/hrdisciplines/benefits/Articles/Pages/GeoDifferentials.aspx)
However, employers may NOT vary pay on protected characteristics such as age, gender, religion, race, or color. Despite this fact, Miller's article from March 2011 refers to the White House report titled Women in America: Indicators of Social and Economic Well-Being , which points out that in 2009 women earned about 75% of what their male counterparts earned. This variance held at all levels of education, but the inequities are even more problematic for women of color.
In some ways this is good news; in 1979 women earned about 62% of what men earned. Still, it shows there is a long way to go before we reach the point of equity. A promising trend is revealed by the fact that in the age group of 24 - 34 year olds, women earn 89% of what men make.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/WageGap.aspx)
The Use of Carve-Outs for Pay for Performance:
So, with less money to go around, how do we make the most of it?
Jim Kochanski and Robin Kegerise of Sibson Consulting wrote an article for SHRM that explains the use of Carve-Outs when budgeting to help support a pay-for-performance compensation model. For example, if an organization is planning on a 3% overall wage increase, 2.5% is set aside for average or high performers, with the additional .5% is reserved for merit pay for top performers.
The article suggests that the carve-out approach works because it creates a mind-set during several parts of the business cycle, such as budgeting, communicating and setting expectations, evaluating performance, and delivering differentiated rewards. One example the article gives is that a standard 3% increase often sets the expectation that all employees will get 3%. By setting the standard increase at 2.5% then allotting the additional .5% for top performers, the organization sets new expectations for employees and creates incentive for each employee to be a top performer.
The article also urges companies to take the step of being honest in communicating to employees. For example, there is no requirement that all money budgeted for increases be spent. If employees are not performing to standards, then they will receive less than the average budgeted increase.
The method of performance evaluation and the metrics used are very important when utilizing a carve-out approach. It is important to align employee objectives with company goals. When the metrics are aligned, then employee performance should have a substantial effect on company performance.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/Carve-Outs.aspx)
Money is Not the Only Motivator:
Miller quotes Daniel Pink in an article from May of this year to make a point about compensation. Pink argues that "people are not coin-operated."
Pink goes on to say that, "people have more sophisticated needs. Human beings are profoundly attuned to the norm of fairness." He advises that employers "pay people enough to take money off the table" and "focus on the work, not the money," to motivate employees. He implores companies that employees cannot be controlled into being engaged and suggests that greater autonomy can lead to increased engagement, productivity, and profitability.
(http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/PinkMoney.aspx)
The Take Away:
Executive compensation is increasing at significant rates. Employee compensation is increasing as well but not nearly as quickly as executive compensation.
While the majority of companies utilize geographic location as a basis for variances in pay, which is legal, there remains a large gap between the wages of female and male workers. The good news is that the gap is decreasing and that the gap is smaller for younger workers (25-34 year olds).
Companies can utilize Carve-Out plans to make better use of their allotted increases by earmarking a portion of the budgeted overall increase to be used for top performers. Similarly, Pink urges companies to remember that money is not the only way to motivate and engage employees.
Works Cited:
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/CEOPayJump.aspx
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/CEOCompRebound.aspx
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/2011Pay.aspx
https://www.bucksurveys.com/BuckSurveys/popup.aspx?src=/BuckSurveys/Portals/0/aspdnsf/images/Product/large/87.jpg
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/Dissatisfaction.aspx
http://www.shrm.org/hrdisciplines/benefits/Articles/Pages/GeoDifferentials.aspx
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/WageGap.aspx
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/Carve-Outs.aspx
http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/PinkMoney.aspx
Tuesday, June 14, 2011
FCRA Amendment Provides Direction on the Use of Credit Scores
On July 21, 2011, an amendment to the Fair Credit Reporting Act (FCRA) will take effect. The amendment provides direction on the use of credit scores as a pre-employment selection tool.
I personally don't like the use of credit scores as a pre-employment screening process. Credit scores can be impacted by how much an individual owes - regardless of whether or not he or she is able to pay it, the length of time the individual has had credit, how much new credit the individual has, and the types of credit he or she has. None of these factors would be particularly informative with regard to how the person will perform in a particular job.
In the past the EEOC has frowned on the use of credit scores because the use of credit scores could create an adverse impact situation. A study by Freddie Mac revealed that almost twice as many black people had "bad" credit records than did white people. As credit scores are based on information that is not necessarily reflective of the applicants ability to perform the job, employers should strongly consider whether or not there is value in using the credit score to determine eligibility for employment.
What the Amendment Requires:
In an article on the SHRM website by Allen Smith, Bruce Richards, an attorney with Taylor English Duma LLP in Atlanta and
formerly general counsel with the credit reporting agency Equifax, states that if an employer uses a consumer report that includes a credit score in order to determine eligibility for employment, the employer will be required to disclose that a credit score was used and to disclose information on the credit score, including the credit score itself, up to four key adverse factors in the score, and the identity of the agency that provided the score so that an applicant may contact the agency to correct any errors.
(http://www.shrm.org/LegalIssues/FederalResources/Pages/NewFCRARequirement.aspx)
This is a tad bit more onerous than utilizing a credit report because it requires the company to identify up to four key adverse factors in the score. When utilizing a credit report for pre-employment screening purposes, the FCRA requires that companies do the following:
Written Notice and Authorization
Before you can get a consumer report for employment purposes, you must notify the individual in writing — in a document consisting solely of this notice — that a report may be used. You also must get the person's written authorization before you ask a CRA for the report. (Special procedures apply to the trucking industry).
Adverse Action Procedures
Step 1: Before you take the adverse action (not hiring, firing, etc), you must give the individual a pre-adverse action disclosure that includes a copy of the individual's consumer report and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act," a document prescribed by the Federal Trade Commission. The CRA that furnishes the individual's report will give you the summary of consumer rights.
Step 2: After you've taken an adverse action, you must give the individual notice orally, in writing, or electronically that the action has been taken in an adverse action notice. It must include:
- The name, address, and phone number of the CRA that supplied the report;
- A statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it; and
- A notice of the individual's right to dispute the accuracy or completeness of any information the agency furnished and his or her right to an additional free consumer report from the agency upon request within 60 days.
(http://business.ftc.gov/documents/bus08-using-consumer-reports-what-employers-need-know)
The Take Away:
Employers should only use credit checks when the use of the check can be tied back to the position. Requiring a credit check for a janitor will likely be hard to defend, unless perhaps the janitor is responsible for purchasing supplies or has access to organizational funds.
When you have determined that a credit report should be run for a position, be sure to follow the appropriate steps as outlined in the FCRA in order to maintain compliance.
HR Consult Team can assist you with your pre-employment screening needs, including assistance with FCRA compliance.
I personally don't like the use of credit scores as a pre-employment screening process. Credit scores can be impacted by how much an individual owes - regardless of whether or not he or she is able to pay it, the length of time the individual has had credit, how much new credit the individual has, and the types of credit he or she has. None of these factors would be particularly informative with regard to how the person will perform in a particular job.
In the past the EEOC has frowned on the use of credit scores because the use of credit scores could create an adverse impact situation. A study by Freddie Mac revealed that almost twice as many black people had "bad" credit records than did white people. As credit scores are based on information that is not necessarily reflective of the applicants ability to perform the job, employers should strongly consider whether or not there is value in using the credit score to determine eligibility for employment.
What the Amendment Requires:
In an article on the SHRM website by Allen Smith, Bruce Richards, an attorney with Taylor English Duma LLP in Atlanta and
formerly general counsel with the credit reporting agency Equifax, states that if an employer uses a consumer report that includes a credit score in order to determine eligibility for employment, the employer will be required to disclose that a credit score was used and to disclose information on the credit score, including the credit score itself, up to four key adverse factors in the score, and the identity of the agency that provided the score so that an applicant may contact the agency to correct any errors.
(http://www.shrm.org/LegalIssues/FederalResources/Pages/NewFCRARequirement.aspx)
This is a tad bit more onerous than utilizing a credit report because it requires the company to identify up to four key adverse factors in the score. When utilizing a credit report for pre-employment screening purposes, the FCRA requires that companies do the following:
Written Notice and Authorization
Before you can get a consumer report for employment purposes, you must notify the individual in writing — in a document consisting solely of this notice — that a report may be used. You also must get the person's written authorization before you ask a CRA for the report. (Special procedures apply to the trucking industry).
Adverse Action Procedures
Step 1: Before you take the adverse action (not hiring, firing, etc), you must give the individual a pre-adverse action disclosure that includes a copy of the individual's consumer report and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act," a document prescribed by the Federal Trade Commission. The CRA that furnishes the individual's report will give you the summary of consumer rights.
Step 2: After you've taken an adverse action, you must give the individual notice orally, in writing, or electronically that the action has been taken in an adverse action notice. It must include:
- The name, address, and phone number of the CRA that supplied the report;
- A statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give specific reasons for it; and
- A notice of the individual's right to dispute the accuracy or completeness of any information the agency furnished and his or her right to an additional free consumer report from the agency upon request within 60 days.
(http://business.ftc.gov/documents/bus08-using-consumer-reports-what-employers-need-know)
The Take Away:
Employers should only use credit checks when the use of the check can be tied back to the position. Requiring a credit check for a janitor will likely be hard to defend, unless perhaps the janitor is responsible for purchasing supplies or has access to organizational funds.
When you have determined that a credit report should be run for a position, be sure to follow the appropriate steps as outlined in the FCRA in order to maintain compliance.
HR Consult Team can assist you with your pre-employment screening needs, including assistance with FCRA compliance.
Monday, June 13, 2011
Workplace Violence
By: Kyle Shaughnessy
Workplace violence is a serious and growing concern for today’s employers. While violence committed by one employee against another makes up a very small percentage of the total number of violent incidents in the workplace, employers can substantially limit the potential for workplace violence by performing thorough background checks. There is no perfect system to eliminate the chances of such violence occurring, but there are some strategies one can use during background checks that can help employers spot potential risks during the hiring process and avoid putting themselves and their employees in danger.
A background check is a common part of the hiring process and can often be successfully used to research an applicant’s criminal history and to verify an applicant’s education and employment history. While the background check does a good job of confirming the information provided by an applicant, there are holes in a typical background check that can be filled in by taking extra steps to gather information about the applicant that may not show up during a typical background check. By performing a local or regional search based off of an applicant’s education and employment history to find out if someone has a criminal record, is a registered sex offender, or has shown other undesirable conduct in the past, one runs the risk of missing information in locations that may not necessarily show up on an applicant’s history, or in a location the applicant purposefully omitted from his or her resume in an attempt to hide information from potential employers. A national search casts a wider net and may turn up information that would be overlooked or completely missed by a local or regional search, giving your company the best chance to gather all the information you want to have before hiring an applicant.
Since it is possible that an applicant may have shown dangerous behavior in the past without being charged with a crime (information that would not show up on a background check at all), past employers may be able to provide more concrete information related to an applicant’s behavior, personality issues, or performance in the workplace. Checking an applicant’s references may give employers additional information on how applicants relate to coworkers and handle conflicts, which can indicate the potential for violence or unacceptable workplace behavior. This may not be as reliable a source as a background check, as some employers may be unwilling to give more than just basic information confirming an applicant’s dates of employment and job title, while others may give more feedback about job performance and character. A release signed by the applicant giving a former employer permission to give this extra information, while not necessarily something that can be required, may be helpful in gathering this extra information to determine the risks associated with a particular applicant.
Obtaining information from background checks or consumer reports must be done in accordance with the Fair Credit Reporting Act (FCRA). Before obtaining a report on a potential or current employee, an employer must notify the subject of the enquiry in writing that a credit report/background check may be sought for employment purposes, the person must consent to this in writing before the report is ordered, and he or she must be notified of his or her rights under the FCRA. If the information received by the report is cause to not hire the applicant, the employer must inform the applicant that the findings of the report are the basis for this decision and give him or her a copy of the report and the document “A Summary of Your Rights Under the Fair Credit Reporting Act.” After deciding not to hire the person, the person must be notified that this decision has been reached, supplied with the information of the agency that performed the report, and informed of his or her right to dispute or clarify the information in the report that led to the decision not to hire. Compliance with the FCRA is crucial to the background check process and gives the employer the opportunity to gather information without fear of legal reprisal, while also giving applicants a fair chance to address any questions, problems, or concerns that the employer may have related to information discovered in a background check.
The entire text of the Fair Credit Reporting Act can be found here:
http://www.ftc.gov/os/statutes/031224fcra.pdf
Again, even the most thorough background check cannot completely eliminate the possibility of workplace violence. There is always the chance that an employee may have a one-time incident without having shown any warning signs of dangerous behavior, and he or she may never act out in a violent manner again. It is important to avoid negligent hiring, however, and a thorough review of an employee’s background and employment history increases the chances that you may be able to avoid violent incidents and possibly save lives by simply gathering as much information as possible during the hiring process. Be sure your HR department is familiar with strategies on how to perform background checks and communicate with past employers to gather all the information necessary to give yourself the best shot at hiring the employees who you want to hire, or be sure that the company you hire to perform your background checks performs national searches of criminal databases and sex offender registries. Ultimately, the responsibility is yours to provide a safe work environment, and not being negligent in your hiring procedures is a valuable way to protect yourself, your employees, and your customers from workplace violence.
Works Cited:
http://workplaceviolencenews.com/2010/03/15/employers-advocate-background-checks-balances/
Workplace violence is a serious and growing concern for today’s employers. While violence committed by one employee against another makes up a very small percentage of the total number of violent incidents in the workplace, employers can substantially limit the potential for workplace violence by performing thorough background checks. There is no perfect system to eliminate the chances of such violence occurring, but there are some strategies one can use during background checks that can help employers spot potential risks during the hiring process and avoid putting themselves and their employees in danger.
A background check is a common part of the hiring process and can often be successfully used to research an applicant’s criminal history and to verify an applicant’s education and employment history. While the background check does a good job of confirming the information provided by an applicant, there are holes in a typical background check that can be filled in by taking extra steps to gather information about the applicant that may not show up during a typical background check. By performing a local or regional search based off of an applicant’s education and employment history to find out if someone has a criminal record, is a registered sex offender, or has shown other undesirable conduct in the past, one runs the risk of missing information in locations that may not necessarily show up on an applicant’s history, or in a location the applicant purposefully omitted from his or her resume in an attempt to hide information from potential employers. A national search casts a wider net and may turn up information that would be overlooked or completely missed by a local or regional search, giving your company the best chance to gather all the information you want to have before hiring an applicant.
Since it is possible that an applicant may have shown dangerous behavior in the past without being charged with a crime (information that would not show up on a background check at all), past employers may be able to provide more concrete information related to an applicant’s behavior, personality issues, or performance in the workplace. Checking an applicant’s references may give employers additional information on how applicants relate to coworkers and handle conflicts, which can indicate the potential for violence or unacceptable workplace behavior. This may not be as reliable a source as a background check, as some employers may be unwilling to give more than just basic information confirming an applicant’s dates of employment and job title, while others may give more feedback about job performance and character. A release signed by the applicant giving a former employer permission to give this extra information, while not necessarily something that can be required, may be helpful in gathering this extra information to determine the risks associated with a particular applicant.
Obtaining information from background checks or consumer reports must be done in accordance with the Fair Credit Reporting Act (FCRA). Before obtaining a report on a potential or current employee, an employer must notify the subject of the enquiry in writing that a credit report/background check may be sought for employment purposes, the person must consent to this in writing before the report is ordered, and he or she must be notified of his or her rights under the FCRA. If the information received by the report is cause to not hire the applicant, the employer must inform the applicant that the findings of the report are the basis for this decision and give him or her a copy of the report and the document “A Summary of Your Rights Under the Fair Credit Reporting Act.” After deciding not to hire the person, the person must be notified that this decision has been reached, supplied with the information of the agency that performed the report, and informed of his or her right to dispute or clarify the information in the report that led to the decision not to hire. Compliance with the FCRA is crucial to the background check process and gives the employer the opportunity to gather information without fear of legal reprisal, while also giving applicants a fair chance to address any questions, problems, or concerns that the employer may have related to information discovered in a background check.
The entire text of the Fair Credit Reporting Act can be found here:
http://www.ftc.gov/os/statutes/031224fcra.pdf
Again, even the most thorough background check cannot completely eliminate the possibility of workplace violence. There is always the chance that an employee may have a one-time incident without having shown any warning signs of dangerous behavior, and he or she may never act out in a violent manner again. It is important to avoid negligent hiring, however, and a thorough review of an employee’s background and employment history increases the chances that you may be able to avoid violent incidents and possibly save lives by simply gathering as much information as possible during the hiring process. Be sure your HR department is familiar with strategies on how to perform background checks and communicate with past employers to gather all the information necessary to give yourself the best shot at hiring the employees who you want to hire, or be sure that the company you hire to perform your background checks performs national searches of criminal databases and sex offender registries. Ultimately, the responsibility is yours to provide a safe work environment, and not being negligent in your hiring procedures is a valuable way to protect yourself, your employees, and your customers from workplace violence.
Works Cited:
http://workplaceviolencenews.com/2010/03/15/employers-advocate-background-checks-balances/
Monday, June 6, 2011
E-Verify Requirement for GA Employers Update
The Supreme Court voted 5-3 that states have the right to enforce mandatory E-Verify statutes tied to the issuance of state business licenses. The case was Chamber of Commerce of the United States of America v. Whiting.
Governor Deal signed HB 87, which requires companies to register with the federal E-Verify program and check the legal status of new hires, into law in May. The Supreme Court decision means that employers will need to comply with the new law.
The requirement to comply will be phased in with employers with 500 employees or more. These companies must begin using E-Verify on Jan. 1, 2012; employers with between 100 and 499 employees must comply by July 1, 2012; and those with 11-99 employees must comply by July 1, 2013.
The use of E-Verify does not alter the employers responsibility to properly complete and retain a form I-9 on all employees.
How HR Consult Team can Help:
HR Consult Team is an E-Verify Designated Agent, which means that HR Consult Team will be able to assist employers with the following:
- Enrolling companies and updating their profile information
- Registering new users
- Creating user accounts for other Program Administrators and General
Users
- Creating and managing cases
- Viewing reports
- Updating profile information for other Program Administrators and
General Users
- Unlocking user accounts
HR Consult Team will also audit your I-9 files and ensure that your company is in compliance, or assist with becoming compliant.
Governor Deal signed HB 87, which requires companies to register with the federal E-Verify program and check the legal status of new hires, into law in May. The Supreme Court decision means that employers will need to comply with the new law.
The requirement to comply will be phased in with employers with 500 employees or more. These companies must begin using E-Verify on Jan. 1, 2012; employers with between 100 and 499 employees must comply by July 1, 2012; and those with 11-99 employees must comply by July 1, 2013.
The use of E-Verify does not alter the employers responsibility to properly complete and retain a form I-9 on all employees.
How HR Consult Team can Help:
HR Consult Team is an E-Verify Designated Agent, which means that HR Consult Team will be able to assist employers with the following:
- Enrolling companies and updating their profile information
- Registering new users
- Creating user accounts for other Program Administrators and General
Users
- Creating and managing cases
- Viewing reports
- Updating profile information for other Program Administrators and
General Users
- Unlocking user accounts
HR Consult Team will also audit your I-9 files and ensure that your company is in compliance, or assist with becoming compliant.
Tuesday, May 31, 2011
Paid Holidays or Paid Time Off
I had a great Memorial Day yesterday. We celebrated my daughter's birthday in Baton Rouge. It was great to see friends and family. It was only possible because so many of them had the day off. It made me think about paid holidays as opposed to Paid Time Off (PTO) policies.
The Request for Paid Holidays:
I once worked for a company that did not have designated Paid Holidays. The company provided PTO to compensate for the lack of holidays. Rather than provide 10 days of PTO and 7 holidays, the company provided 17 days of PTO, which could be used for any reason the employee wanted.
We had one employee who periodically campaigned for paid holidays. I tried to explain to her that her PTO could be used to make any holiday a paid holiday. She could not grasp the distinction. To her PTO was equivalent to vacation time, and holidays were distinct from vacation time.
I tried to explain to this employee that establishing set holidays reduced flexibility. For example, I have never taken off for Memorial Day unless my employer was closed. Even if most of the office took off the day for Memorial Day, I would go into work. It was more valuable for me to work (with fewer interruptions I might add) on Memorial Day and save the PTO day. The employee still felt it was better to have holidays, citing the fact that she felt guilty taking off of work. She felt that by having holidays she would not have to feel guilty, since everyone would be off of work.
Eventually, we put the matter up for a vote. The vote was between (1) reducing the amount of PTO and provide an equivalent number of paid holidays; or (2) maintaining the PTO schedule (no change). The PTO (no change) option won and the matter was closed. The PTO option won because most employees understood that the flexibility was more valuable than reductions in the feelings of guilt that accompanied taking a off for a day.
The Guilt Aspect:
I would argue that it benefits the company to encourage employees to take time off so long as it does not negatively impact operations. Time off helps employees remain productive at higher levels and reduces burnout. This mentality combined with a flexible PTO schedule enhances the paid time off benefit offering. Consider how an employee would feel when his or her employer wants the employee to have down time, encourages it even, and further does not dictate on which days the employee must use this time. I would argue that the employee will find more value in this arrangement than in one where the employee was provided set holidays but was discouraged from taking time off on other occasions.
The Diversity Problem:
Further, as companies began to realize the value of diversity, the religious holiday question becomes pertinent. I recently read an article on the Society for Human Resource Management (SHRM) website by Rebecca Hastings that provided the example of the Burlington, Vermont school board, which added a Muslim and Jewish holy day to its school calendar, only to have requests from representatives of the Hindu community to add Diwali to the list of holidays recognized by the school district.
(http://www.shrm.org/hrdisciplines/employeerelations/articles/Pages/HolidayPolicyInclusive.aspx)
Why Holidays are Better:
All of that noted, I would add that the liability of utilizing PTO as opposed to Paid Holidays is that, depending on the state in which you operate, the PTO may be considered due at the time of termination, whereas Paid Holidays are only due if the employee works for the employer at the time of the Holiday. Segregating holiday and sick leave from a PTO policy can reduce the liability due at termination.
Additionally, to help alleviate the religious holiday concern, employers may designate "floating holidays" which can be used by the employee at his or her discretion.
My Conclusion:
Employers are well served in creating as many free or low cost benefits to provide employees. Job sharing, telecommuting, and flexible start/end times are all examples of benefits that mean a lot to employees and don't cost employers much, if anything. Similarly, PTO plans provide more flexibility for employees and thus allow them to utilize the time in the way they see fit. There is no additional cost for providing paid time off in this method and the added benefit is priceless.
The problem that companies must strive to overcome is an environment which discourages the use of PTO. A culture that encourages employees to work hard and put in extra work when needed can be combined with a culture that encourages employees to recharge, take time off, honor their families and their commitments, and observe their religious holidays in a manner that is consistent with their religious beliefs. By establishing such a culture, employers will find that they have employees who want to produce (if only due to peer pressure) and are better able to produce (as they are less likely to suffer from burnout).
In the end, each company should make the decision that best fits its culture, whether that means set holidays, flexible holidays, PTO, vacation time, or no paid holidays. When making the decision, employers should consider their workforce and the needs of their employees. There is no right or wrong answer, but by considering the benefits and detriments of each method of providing time off, and further, the specific terms of the policy, employers can enhance their benefit offering at little or no cost.
Works Cited:
http://www.shrm.org/hrdisciplines/employeerelations/articles/Pages/HolidayPolicyInclusive.aspx
The Request for Paid Holidays:
I once worked for a company that did not have designated Paid Holidays. The company provided PTO to compensate for the lack of holidays. Rather than provide 10 days of PTO and 7 holidays, the company provided 17 days of PTO, which could be used for any reason the employee wanted.
We had one employee who periodically campaigned for paid holidays. I tried to explain to her that her PTO could be used to make any holiday a paid holiday. She could not grasp the distinction. To her PTO was equivalent to vacation time, and holidays were distinct from vacation time.
I tried to explain to this employee that establishing set holidays reduced flexibility. For example, I have never taken off for Memorial Day unless my employer was closed. Even if most of the office took off the day for Memorial Day, I would go into work. It was more valuable for me to work (with fewer interruptions I might add) on Memorial Day and save the PTO day. The employee still felt it was better to have holidays, citing the fact that she felt guilty taking off of work. She felt that by having holidays she would not have to feel guilty, since everyone would be off of work.
Eventually, we put the matter up for a vote. The vote was between (1) reducing the amount of PTO and provide an equivalent number of paid holidays; or (2) maintaining the PTO schedule (no change). The PTO (no change) option won and the matter was closed. The PTO option won because most employees understood that the flexibility was more valuable than reductions in the feelings of guilt that accompanied taking a off for a day.
The Guilt Aspect:
I would argue that it benefits the company to encourage employees to take time off so long as it does not negatively impact operations. Time off helps employees remain productive at higher levels and reduces burnout. This mentality combined with a flexible PTO schedule enhances the paid time off benefit offering. Consider how an employee would feel when his or her employer wants the employee to have down time, encourages it even, and further does not dictate on which days the employee must use this time. I would argue that the employee will find more value in this arrangement than in one where the employee was provided set holidays but was discouraged from taking time off on other occasions.
The Diversity Problem:
Further, as companies began to realize the value of diversity, the religious holiday question becomes pertinent. I recently read an article on the Society for Human Resource Management (SHRM) website by Rebecca Hastings that provided the example of the Burlington, Vermont school board, which added a Muslim and Jewish holy day to its school calendar, only to have requests from representatives of the Hindu community to add Diwali to the list of holidays recognized by the school district.
(http://www.shrm.org/hrdisciplines/employeerelations/articles/Pages/HolidayPolicyInclusive.aspx)
Why Holidays are Better:
All of that noted, I would add that the liability of utilizing PTO as opposed to Paid Holidays is that, depending on the state in which you operate, the PTO may be considered due at the time of termination, whereas Paid Holidays are only due if the employee works for the employer at the time of the Holiday. Segregating holiday and sick leave from a PTO policy can reduce the liability due at termination.
Additionally, to help alleviate the religious holiday concern, employers may designate "floating holidays" which can be used by the employee at his or her discretion.
My Conclusion:
Employers are well served in creating as many free or low cost benefits to provide employees. Job sharing, telecommuting, and flexible start/end times are all examples of benefits that mean a lot to employees and don't cost employers much, if anything. Similarly, PTO plans provide more flexibility for employees and thus allow them to utilize the time in the way they see fit. There is no additional cost for providing paid time off in this method and the added benefit is priceless.
The problem that companies must strive to overcome is an environment which discourages the use of PTO. A culture that encourages employees to work hard and put in extra work when needed can be combined with a culture that encourages employees to recharge, take time off, honor their families and their commitments, and observe their religious holidays in a manner that is consistent with their religious beliefs. By establishing such a culture, employers will find that they have employees who want to produce (if only due to peer pressure) and are better able to produce (as they are less likely to suffer from burnout).
In the end, each company should make the decision that best fits its culture, whether that means set holidays, flexible holidays, PTO, vacation time, or no paid holidays. When making the decision, employers should consider their workforce and the needs of their employees. There is no right or wrong answer, but by considering the benefits and detriments of each method of providing time off, and further, the specific terms of the policy, employers can enhance their benefit offering at little or no cost.
Works Cited:
http://www.shrm.org/hrdisciplines/employeerelations/articles/Pages/HolidayPolicyInclusive.aspx
Monday, May 9, 2011
Going the Extra Mile for My Clients (Straight Down if Necessary)
My wife and editor is one of the most accepting individuals I have ever known. One of her few pet peeves is when people use the word "literally" incorrectly. Her favorite example is, "I literally died when..."
I have always felt a strong commitment to my employers and clients. I would do anything I can to help support them. As of Saturday I can say "I would literally jump out of a plane for my clients," without annoying my wife. The truth is, I probably would not have jumped out of the plane if I were not doing it for one of my clients!
Extra Special People, Inc. (ESP) held a clever fund-raiser in which volunteers sought to raise at least $500 in donations in order to sky-dive. The money helped send a kid to ESP camp. The fund raiser was a success with over $12,000 raised!
I sought to work with Extra Special People because I believe in their mission and want to support them. The easiest way to support them was to help with their human resource needs. When the opportunity came to support them by jumping out of a plane, I felt the call to help.
The problem is, I also felt tremendous fear and trepidation. I hate roller coasters. Heck, I hate driving in the mountains. It took me years to be comfortable flying on a plane. What was I thinking?
I can say that up and through the moment of the jump, I was thinking "What was I thinking?"
In the end, I am glad I did it. I am glad to show that I support ESP to the point of breaking through my own fear and completing the task which I set out to complete. While I always felt I could, it is nice to know that I proved it.
I feel confident in saying that I am literally willing to do everything I can to support my clients, whether that means becoming an E-Verify Designated Agent to help my clients comply with the new state law, helping my clients with duties that are unrelated to human resources, or jumping out of a plane as part of a fundraising effort.
My goal is to help small companies committed to legal compliance and ethical business dealings succeed. I achieve this goal by providing low cost human resource assistance utilizing my knowledge, skills, and abilities. I go a step further by offering any assistance I possibly can, like helping to market my clients or participating in their fund-raisers.
Maybe this post is a bit of a "toot my own horn" post, but I am proud of myself. I am proud of what I did, but I am also proud of why I did it. Integrity is extremely important to me, and last weekend when I jumped out of a plane, I proved it. I overcame my fear and followed through on my commitment to my client. So, "Yay, me!"
As part of that commitment to help clients, I am now an E-Verify Designated Agent. I can ensure clients comply with the provisions of SB 40, which requires employers with 10 or more employees to utilize E-Verify. As a Designated Agent, I can help employers with the following:
- Creating and managing cases in E-Verify
- Creating and managing client accounts
- Overseeing cases created by clients
- Creating Reports
- Updating Company Profile Information
- Reseting passwords for your company’s users
It isn't jumping out of a plane, but it is still helpful!
I have always felt a strong commitment to my employers and clients. I would do anything I can to help support them. As of Saturday I can say "I would literally jump out of a plane for my clients," without annoying my wife. The truth is, I probably would not have jumped out of the plane if I were not doing it for one of my clients!
Extra Special People, Inc. (ESP) held a clever fund-raiser in which volunteers sought to raise at least $500 in donations in order to sky-dive. The money helped send a kid to ESP camp. The fund raiser was a success with over $12,000 raised!
I sought to work with Extra Special People because I believe in their mission and want to support them. The easiest way to support them was to help with their human resource needs. When the opportunity came to support them by jumping out of a plane, I felt the call to help.
The problem is, I also felt tremendous fear and trepidation. I hate roller coasters. Heck, I hate driving in the mountains. It took me years to be comfortable flying on a plane. What was I thinking?
I can say that up and through the moment of the jump, I was thinking "What was I thinking?"
In the end, I am glad I did it. I am glad to show that I support ESP to the point of breaking through my own fear and completing the task which I set out to complete. While I always felt I could, it is nice to know that I proved it.
I feel confident in saying that I am literally willing to do everything I can to support my clients, whether that means becoming an E-Verify Designated Agent to help my clients comply with the new state law, helping my clients with duties that are unrelated to human resources, or jumping out of a plane as part of a fundraising effort.
My goal is to help small companies committed to legal compliance and ethical business dealings succeed. I achieve this goal by providing low cost human resource assistance utilizing my knowledge, skills, and abilities. I go a step further by offering any assistance I possibly can, like helping to market my clients or participating in their fund-raisers.
Maybe this post is a bit of a "toot my own horn" post, but I am proud of myself. I am proud of what I did, but I am also proud of why I did it. Integrity is extremely important to me, and last weekend when I jumped out of a plane, I proved it. I overcame my fear and followed through on my commitment to my client. So, "Yay, me!"
As part of that commitment to help clients, I am now an E-Verify Designated Agent. I can ensure clients comply with the provisions of SB 40, which requires employers with 10 or more employees to utilize E-Verify. As a Designated Agent, I can help employers with the following:
- Creating and managing cases in E-Verify
- Creating and managing client accounts
- Overseeing cases created by clients
- Creating Reports
- Updating Company Profile Information
- Reseting passwords for your company’s users
It isn't jumping out of a plane, but it is still helpful!
Wednesday, April 20, 2011
The Peril of Regard
The Americans with Disabilities Act (ADA) has a three prong test for disability:
- Individuals with a physical or mental impairment which substantially limits one or more major life activities,
- Individuals who have a record of such an impairment, or
- Individuals who are regarded as having such an impairment.
It is the last prong that prompts this post.
Even if there is NO Disability:
The EEOC states "The inclusion of persons regarded as having a substantially limiting impairment reflects Congressional intent to protect all persons who are subjected to discrimination based on disability, even if they do not in fact have a disability. It also reflects a recognition by Congress that the reactions of others to an impairment or a perceived impairment can be just as disabling as the limitations caused by an actual impairment."
(http://www.eeoc.gov/policy/docs/902cm.html#902.8, Italics added for emphasis).
In other words, if the employer takes action based upon a perception that the individual is disabled, the employer has ensured the individual is covered under the ADA, and thus created liability for the company, even when it is determined that the employee is not disabled.
Regarding Regard:
The rule focuses on negative reactions, prejudiced attitudes, ignorance, and fears that cause an employer to take action against an individual as opposed to sound business based reasoning.
The EEOC provides the example that a person with severe burns or with cosmetic disfigurement may be regarded as having a disability based upon employer fears about negative reactions of customers or co-workers.
(http://www.eeoc.gov/policy/docs/902cm.html#902.8)
Another example may be not hiring an individual because of a perception that his or her weight would prohibit them from completing the job properly or that it may result in the employee taking too much time off.
Real Life Example:
In 2005, Joan Eshelman won a case against her former employer Agere Systems, Inc. because they regarded her as having a disability. In short, Ms. Eshelman was having trouble with her memory following treatment for cancer. She had found various ways to work around this problem and her performance was not impacted.
Agere was forced to layoff 18,000 employees and utilized a ranking system to make the determination of who was to be laid off. Initially Ms. Eshelman was ranked highly by her supervisors. Once the supervisors learned that her new position with the company would require her to engage in certain activities they believed would be hard for her, they altered her scores so that she ranked very low on the scale.
Despite the fact that Ms. Eshelman proved fully capable of performing her job and despite the fact that there were several options available to help accommodate her, the company made a decision based upon its perception that she would be incapable. It regarded her as being disabled and took action based upon that disability.
(http://www.paed.uscourts.gov/documents/opinions/05D1278P.pdf)
The Take-Away:
The best way to avoid discrimination is to make sound business decisions based upon all the information available.
The ADA does not require employers to employ disabled individuals. It does not prohibit employers from hiring the most qualified individuals. It does prohibit employers from making employment decisions solely on the basis of a disability.
As the focus of this blog is on the "Regarded As" prong of the definition of disability, the most important take away is that the employer should not presume the applicant/employee will be incapable of meeting the requirements of the position.
If you are concerned about the applicant/employee's ability to fulfill the duties of the position, you can ask if he or she can perform the functions of the job.
Works Cited:
http://www.eeoc.gov/policy/docs/902cm.html#902.8
http://www.paed.uscourts.gov/documents/opinions/05D1278P.pdf
- Individuals with a physical or mental impairment which substantially limits one or more major life activities,
- Individuals who have a record of such an impairment, or
- Individuals who are regarded as having such an impairment.
It is the last prong that prompts this post.
Even if there is NO Disability:
The EEOC states "The inclusion of persons regarded as having a substantially limiting impairment reflects Congressional intent to protect all persons who are subjected to discrimination based on disability, even if they do not in fact have a disability. It also reflects a recognition by Congress that the reactions of others to an impairment or a perceived impairment can be just as disabling as the limitations caused by an actual impairment."
(http://www.eeoc.gov/policy/docs/902cm.html#902.8, Italics added for emphasis).
In other words, if the employer takes action based upon a perception that the individual is disabled, the employer has ensured the individual is covered under the ADA, and thus created liability for the company, even when it is determined that the employee is not disabled.
Regarding Regard:
The rule focuses on negative reactions, prejudiced attitudes, ignorance, and fears that cause an employer to take action against an individual as opposed to sound business based reasoning.
The EEOC provides the example that a person with severe burns or with cosmetic disfigurement may be regarded as having a disability based upon employer fears about negative reactions of customers or co-workers.
(http://www.eeoc.gov/policy/docs/902cm.html#902.8)
Another example may be not hiring an individual because of a perception that his or her weight would prohibit them from completing the job properly or that it may result in the employee taking too much time off.
Real Life Example:
In 2005, Joan Eshelman won a case against her former employer Agere Systems, Inc. because they regarded her as having a disability. In short, Ms. Eshelman was having trouble with her memory following treatment for cancer. She had found various ways to work around this problem and her performance was not impacted.
Agere was forced to layoff 18,000 employees and utilized a ranking system to make the determination of who was to be laid off. Initially Ms. Eshelman was ranked highly by her supervisors. Once the supervisors learned that her new position with the company would require her to engage in certain activities they believed would be hard for her, they altered her scores so that she ranked very low on the scale.
Despite the fact that Ms. Eshelman proved fully capable of performing her job and despite the fact that there were several options available to help accommodate her, the company made a decision based upon its perception that she would be incapable. It regarded her as being disabled and took action based upon that disability.
(http://www.paed.uscourts.gov/documents/opinions/05D1278P.pdf)
The Take-Away:
The best way to avoid discrimination is to make sound business decisions based upon all the information available.
The ADA does not require employers to employ disabled individuals. It does not prohibit employers from hiring the most qualified individuals. It does prohibit employers from making employment decisions solely on the basis of a disability.
As the focus of this blog is on the "Regarded As" prong of the definition of disability, the most important take away is that the employer should not presume the applicant/employee will be incapable of meeting the requirements of the position.
If you are concerned about the applicant/employee's ability to fulfill the duties of the position, you can ask if he or she can perform the functions of the job.
Works Cited:
http://www.eeoc.gov/policy/docs/902cm.html#902.8
http://www.paed.uscourts.gov/documents/opinions/05D1278P.pdf
Tuesday, April 19, 2011
I-9s on My Mind
I-9s are a common point of liability for companies. While seemingly easy to complete, few employers pay appropriate attention to the details of the form and the requirements placed on employers to complete it.
One of the most common mistakes I have seen made is having the employee complete the form more than three days after he or she starts working. The cost of this violation could be $110 per I-9 form.
I recently audited a client who had 14 errors on the 4 forms I reviewed. The cost of that could be more than $1,400. Of course, one would suspect a similar number of errors on the remaining forms, potentially costing the employer thousands of dollars if she is audited.
Combine that with the United States Citizenship and Immigration Services's (USCIS) strategic plan of cracking down on I-9 noncompliance through 2014, and employers should be paying attention.
As part of a broader effort to reduce illegal immigration, Georgia passed SB 40/HB 87, which requires employers with 10 or more employees to start using E-Verify as soon as July 1, 2011. The law would also require new businesses to verify that they are authorized to utilize E-Verify before obtaining the necessary licenses and certificates to do business.
And now to the News:
On April 15, 2011, the USCIS published a Final Rule relating to I-9 forms.
The main focus is on prohibiting employers from accepting expired documents. The reasoning behind this rule is that expired documents may not demonstrate the correct status of the bearer, are prone to tampering and fraudulent use, and may create confusion among employers.
In addition, the USCIS expressly states that Forms I-688, I-688A, and I-688B are removed from the list of acceptable documents because the USCIS no longer issues these documents, and all document issues would be expired at this time.
The USCIS added the new U.S. passport card and temporary Form I-551 "Permanent Resident Card" with a printed notation on a machine readable immigrant visa, as well as documentation for certain citizens of the Federated States of Mirconesia (FSM) and the Republic of the Marshall Islands (RMI) to List A.
The Take Away:
The final rule takes effect on May 16, 2011.
A copy of the current form is available at: http://www.uscis.gov/files/form/i-9.pdf
If you have not audited your I-9 files for compliance, let HR Consult Team do it for you! Contact us today to schedule your audit.
Also, if you need assistance with E-Verify, HR Consult Team is in the process of becoming an E-Verify Employer Agent and can assist employers with establishing an account and utilizing E-Verify.
One of the most common mistakes I have seen made is having the employee complete the form more than three days after he or she starts working. The cost of this violation could be $110 per I-9 form.
I recently audited a client who had 14 errors on the 4 forms I reviewed. The cost of that could be more than $1,400. Of course, one would suspect a similar number of errors on the remaining forms, potentially costing the employer thousands of dollars if she is audited.
Combine that with the United States Citizenship and Immigration Services's (USCIS) strategic plan of cracking down on I-9 noncompliance through 2014, and employers should be paying attention.
As part of a broader effort to reduce illegal immigration, Georgia passed SB 40/HB 87, which requires employers with 10 or more employees to start using E-Verify as soon as July 1, 2011. The law would also require new businesses to verify that they are authorized to utilize E-Verify before obtaining the necessary licenses and certificates to do business.
And now to the News:
On April 15, 2011, the USCIS published a Final Rule relating to I-9 forms.
The main focus is on prohibiting employers from accepting expired documents. The reasoning behind this rule is that expired documents may not demonstrate the correct status of the bearer, are prone to tampering and fraudulent use, and may create confusion among employers.
In addition, the USCIS expressly states that Forms I-688, I-688A, and I-688B are removed from the list of acceptable documents because the USCIS no longer issues these documents, and all document issues would be expired at this time.
The USCIS added the new U.S. passport card and temporary Form I-551 "Permanent Resident Card" with a printed notation on a machine readable immigrant visa, as well as documentation for certain citizens of the Federated States of Mirconesia (FSM) and the Republic of the Marshall Islands (RMI) to List A.
The Take Away:
The final rule takes effect on May 16, 2011.
A copy of the current form is available at: http://www.uscis.gov/files/form/i-9.pdf
If you have not audited your I-9 files for compliance, let HR Consult Team do it for you! Contact us today to schedule your audit.
Also, if you need assistance with E-Verify, HR Consult Team is in the process of becoming an E-Verify Employer Agent and can assist employers with establishing an account and utilizing E-Verify.
Friday, April 15, 2011
FLSA Day Three: Rounding Rule and Hours Worked
A colleague contacted me a couple of days ago regarding an issue he was having at work. One of his clients utilizes time rounding but always in favor of the employer. My colleague knew this was a violation of the Fair Labor Standards Act (FLSA), but was facing opposition from the client and from his supervisor with regard to forcing a change. To my colleague's credit, he has taken all of the appropriate steps to rectify it, notifying the company, providing the client with the pertinent rules and regulations, and documenting his efforts to ensure compliance.
Vicki Lambert wrote a white paper for ADP that outlines the three most common FLSA violations. Number two on the list is time tracking, which includes incorrect rounding practices. (http://tinyurl.com/ADP-FLSA)
The Rule:
The FLSA does allow for time rounding practices, as outlined in DOL 29 CFR Sec. 785.48(b):
“Rounding” practices. It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees' starting time and stopping time to the nearest 5 minutes or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.
(http://tinyurl.com/FLSA-Regs) Italics added for emphasis.
How to Abide:
The question becomes, if you choose to round, how do you ensure compliance?
Presuming the employer chooses to round to the nearest quarter hour, the Department of Labor (DOL) recommends utilizing the seven (7) minute rule. Using the seven minute rule, employee time from 1 to 7 minutes may be rounded down and thus not counted as hours worked, but employee time from 8 to 14 minutes must be rounded up and counted as a quarter hour of work time.
The DOL believes this method to balance out over time and that it ensures employees are paid for all of their hours worked. Employers can use this method in comfort knowing that the DOL has recommended it.
Other Options:
Employers who utilize timekeeping systems can actually track time to the nearest second. Given this capability, employers should track time to the second. This ensures the employee is only paid for the hours he or she actually work. This is the best option in my opinion.
Another option is to always round in favor of the employee. Personally, I see little value in this option, outside of erring on the side of caution. The benefit of this method is that it is hard to accuse the company of violating the FLSA. The detriment is that the company is always paying for more hours than the employee worked. If the company can afford to do this, then I am all for it. However, for most companies, this is not a viable option.
I do not have practice with the third option, but I am aware that some companies always round starting times in the employee's favor and quitting times in the employer's favor. In theory this would balance out as well, although I am not totally comfortable with the method.
A Note on Automatic Deduction of Meal Times:
While not exactly pertinent to the rounding rule, I want to note that automatically deducting meal times can create liability under the FLSA. In order to be considered a bona fide meal time, the break must be at least 20 minutes. This is based upon DOL 29 CFR Sec. 785.18, which states:
Rest periods of short duration, running from 5 minutes to about 20 minutes, are common in industry. They promote the efficiency of the employee and are customarily paid for as working time. They must be counted as hours worked. Compensable time of rest periods may not be offset against other working time such as compensable waiting time or on-call time.
(http://tinyurl.com/FLSA-Regs)
A bona fide meal break under the FLSA is generally 30 minutes and need not be compensated. However, the employee must be fully relieved of duty for the entire break. An employee eating at his or her desk and answering phones would not be considered to be on a meal break. If the employer automatically deducts 30 minutes for a meal break from his or her time, the employer is technically violating the FLSA.
Take Away:
The goal of the FLSA is to ensure that employees are paid fairly. Employers should revisit all pay policies to ensure that they are aligned with FLSA standards. When in doubt, the rule of thumb is to ensure that employees are at least properly paid for all the hours they worked.
Where there is a rounding rule, the employer must ensure it does not always favor the employer.
The best practice is to pay to the minute. Current timekeeping software has this capability and requires little or no additional work for the employer. When this cannot be done, then utilizing the 7 minute rounding rule (noted above) is the best option.
Works Cited:
http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=48d6ee3b99d3b3a97b1bf189e1757786&rgn=div5&view=text&node=29:3.1.1.2.44&idno=29#29:3.1.1.2.44.3.436.10
http://www.adp.com/workforce-management/docs/whitepaper/FLSA_White_Paper.pdf
Vicki Lambert wrote a white paper for ADP that outlines the three most common FLSA violations. Number two on the list is time tracking, which includes incorrect rounding practices. (http://tinyurl.com/ADP-FLSA)
The Rule:
The FLSA does allow for time rounding practices, as outlined in DOL 29 CFR Sec. 785.48(b):
“Rounding” practices. It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees' starting time and stopping time to the nearest 5 minutes or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.
(http://tinyurl.com/FLSA-Regs) Italics added for emphasis.
How to Abide:
The question becomes, if you choose to round, how do you ensure compliance?
Presuming the employer chooses to round to the nearest quarter hour, the Department of Labor (DOL) recommends utilizing the seven (7) minute rule. Using the seven minute rule, employee time from 1 to 7 minutes may be rounded down and thus not counted as hours worked, but employee time from 8 to 14 minutes must be rounded up and counted as a quarter hour of work time.
The DOL believes this method to balance out over time and that it ensures employees are paid for all of their hours worked. Employers can use this method in comfort knowing that the DOL has recommended it.
Other Options:
Employers who utilize timekeeping systems can actually track time to the nearest second. Given this capability, employers should track time to the second. This ensures the employee is only paid for the hours he or she actually work. This is the best option in my opinion.
Another option is to always round in favor of the employee. Personally, I see little value in this option, outside of erring on the side of caution. The benefit of this method is that it is hard to accuse the company of violating the FLSA. The detriment is that the company is always paying for more hours than the employee worked. If the company can afford to do this, then I am all for it. However, for most companies, this is not a viable option.
I do not have practice with the third option, but I am aware that some companies always round starting times in the employee's favor and quitting times in the employer's favor. In theory this would balance out as well, although I am not totally comfortable with the method.
A Note on Automatic Deduction of Meal Times:
While not exactly pertinent to the rounding rule, I want to note that automatically deducting meal times can create liability under the FLSA. In order to be considered a bona fide meal time, the break must be at least 20 minutes. This is based upon DOL 29 CFR Sec. 785.18, which states:
Rest periods of short duration, running from 5 minutes to about 20 minutes, are common in industry. They promote the efficiency of the employee and are customarily paid for as working time. They must be counted as hours worked. Compensable time of rest periods may not be offset against other working time such as compensable waiting time or on-call time.
(http://tinyurl.com/FLSA-Regs)
A bona fide meal break under the FLSA is generally 30 minutes and need not be compensated. However, the employee must be fully relieved of duty for the entire break. An employee eating at his or her desk and answering phones would not be considered to be on a meal break. If the employer automatically deducts 30 minutes for a meal break from his or her time, the employer is technically violating the FLSA.
Take Away:
The goal of the FLSA is to ensure that employees are paid fairly. Employers should revisit all pay policies to ensure that they are aligned with FLSA standards. When in doubt, the rule of thumb is to ensure that employees are at least properly paid for all the hours they worked.
Where there is a rounding rule, the employer must ensure it does not always favor the employer.
The best practice is to pay to the minute. Current timekeeping software has this capability and requires little or no additional work for the employer. When this cannot be done, then utilizing the 7 minute rounding rule (noted above) is the best option.
Works Cited:
http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=48d6ee3b99d3b3a97b1bf189e1757786&rgn=div5&view=text&node=29:3.1.1.2.44&idno=29#29:3.1.1.2.44.3.436.10
http://www.adp.com/workforce-management/docs/whitepaper/FLSA_White_Paper.pdf
Thursday, April 14, 2011
FLSA Exempt vs Non-Exempt
During a conversation I had yesterday, I was informed about a company which was paying several employees on a salaried basis, even though the employee was non-exempt. As noted in my blog from yesterday, this practice is fine.
The problem is, this company does not pay these salaried non-exempt employees overtime, which is not fine.
A professor of mine pointed out that many students fail to recognize the double negative of non-exempt. Non-exempt means not not subject to the rules. Specifically with regard to the Fair Labor Standards Act (FLSA), when we speak of exempt or non-exempt, we are talking about the overtime provisions of the law.
The DOL provides the following language in their overview of the overtime requirements of the FLSA:
Unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.
http://www.dol.gov/whd/overtime_pay.htm
The Common Mistake:
"But when I pay someone a salary, I am paying that for all hours worked. I don't have to pay overtime for those individuals," one might say.
In theory, paying someone on salary means that you are paying them to complete work, as opposed to paying them to work for a certain number of hours. It does not matter if the employee works 30, 40, 50, or 60 hours in a week. They are paid a flat salary for that time period.
The common mistake made by employers is the presumption that by paying an employee on salary, they don't have to worry about overtime. This is, unfortunately, incorrect.
While most exemptions require that the employee be paid on a salaried basis, there are other requirements for the position to meet an exemption. A full review of the position responsibilities and employee credentials is necessary to determine if an exemption is applicable.
Here is a link to the DOL fact sheet on exemptions: http://www.dol.gov/whd/regs/compliance/fairpay/fs17a_overview.pdf
Fluctuating Work Week:
Salaried non-exempt is a strange beast. I have recommended the structure for companies that are looking to save money on overtime, but usually recommend avoiding it. However, the fluctuating work week method of calculating overtime for salaried non-exempt employees can result in cost savings for the company.
The concept is that the employee's salary compensates the employee for all hours worked. So, if the employee is paid $400 a week and works 40 hours, their hourly rate is $10. If the employee works 50 hours, their hourly rate drops to $8.
The company is still required to pay overtime, but the fluctuating work week provides an alternate calculation for overtime. The steps are as follows:
Step 1: Determine the hourly rate.
The formula for this is - Salary/Hours Worked = Hourly Rate
Step 2: Determine the overtime due
The formula for this is - Hourly Rate x Overtime Hours x .5 = Overtime due
Example:
Fluctuating Work Week Overtime Calculation:
Salary: $400
Hours Worked: 50
Hourly Rate: $400/50 = $8
Overtime Due: $8 x 10 (hours over 40) x .5 = $40
Total pay for that week: $440
Standard Overtime Calculation:
(Hourly Rate x Regular Hours) + (1.5 Hourly Rate x Overtime Hours) = Weekly Pay
($10 x 40)+ ($15 x 10) = $400 + $150 = $550
Comparison:
Fluctuating work week method of calculating overtime saves the company $110.
The savings comes in the overtime premium. The standard method of calculating the overtime premium is 1.5x the hourly rate. The fluctuating work week presumes that the 1x the hourly rate was paid in the salary, thus leaving only .5x the hourly rate for the overtime premium.
A Note about Salaried Pay:
In order to take advantage of paying an employee on a salaried basis the company may not reduce the salary level if the employee works less than 40 hours.
The idea is that the employer gains benefit by paying on a salaried basis if the employee works more than 40 hours (decreasing the hourly rate), so there must be an equivalent benefit for the employee by maintaining the same level of pay for fewer hours (increasing the hourly rate).
This is why I rarely recommend paying employees on a salaried non-exempt basis. In short, it creates obligation to pay the employee a fixed amount, which may or may not work out in the company's favor.
Back to the Problem:
The point is that while there is potential value in utilizing the salaried non-exempt/fluctuating work week method of calculating overtime, paying someone on a salaried non-exempt basis is not a method of avoiding overtime payments.
Failure to properly pay the non-exempt employee overtime is perilous for the company.
The Peril:
There are two elements of liability with regard to violating the FLSA.
The first is based on the employee's right to file suit. Generally the employee is allowed to seek back pay for the previous two years (three years in the case of a willful violation) and an equal amount as liquidated damages, plus attorney's fees and court costs.
The company mentioned above has created a large level of exposure. An estimated 20 employees are impacted by their current pay policy. Presuming these employees average $30,000 a year and work an average of 5 hours of overtime per week and presuming that the violations are not found to be willful, the company faces exposure of $150,000 in back pay, plus an equal amount in liquidated damages. This is in addition to attorney's fees and court costs.
The second area of liability is with regard to penalties assessed by the DOL. Even if the employee does not bring suit, the DOL will require the payment of back wages. In the example above, $150,000.
If the violation is found to be willful, employers may be criminally prosecuted and fined up to $10,000. A second violation may result in imprisonment.
Employers who repeatedly or willful violate the minimum wage or overtime provisions are subject to civil money penalties of up to $1,100 per violation.
Ignorance is Risk:
As you can see, even if the company can claim ignorance, it faces large costs for violations of the FLSA. The "head in the sand" approach to human resources is not fruitful. It may save some costs in the short-term, but in the long-term the exposure is too large to ignore.
The Take Away:
If you are paying non-exempt employees in a salaried basis, review your practices to ensure that you are abiding by the FLSA regulations. Periodic payroll audits are always a good idea and it may be time to start one. If you don't have the in-house capacity to do it, HR Consult Team can help.
Works Cited:
http://www.dol.gov/whd/overtime_pay.htm
The problem is, this company does not pay these salaried non-exempt employees overtime, which is not fine.
A professor of mine pointed out that many students fail to recognize the double negative of non-exempt. Non-exempt means not not subject to the rules. Specifically with regard to the Fair Labor Standards Act (FLSA), when we speak of exempt or non-exempt, we are talking about the overtime provisions of the law.
The DOL provides the following language in their overview of the overtime requirements of the FLSA:
Unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.
http://www.dol.gov/whd/overtime_pay.htm
The Common Mistake:
"But when I pay someone a salary, I am paying that for all hours worked. I don't have to pay overtime for those individuals," one might say.
In theory, paying someone on salary means that you are paying them to complete work, as opposed to paying them to work for a certain number of hours. It does not matter if the employee works 30, 40, 50, or 60 hours in a week. They are paid a flat salary for that time period.
The common mistake made by employers is the presumption that by paying an employee on salary, they don't have to worry about overtime. This is, unfortunately, incorrect.
While most exemptions require that the employee be paid on a salaried basis, there are other requirements for the position to meet an exemption. A full review of the position responsibilities and employee credentials is necessary to determine if an exemption is applicable.
Here is a link to the DOL fact sheet on exemptions: http://www.dol.gov/whd/regs/compliance/fairpay/fs17a_overview.pdf
Fluctuating Work Week:
Salaried non-exempt is a strange beast. I have recommended the structure for companies that are looking to save money on overtime, but usually recommend avoiding it. However, the fluctuating work week method of calculating overtime for salaried non-exempt employees can result in cost savings for the company.
The concept is that the employee's salary compensates the employee for all hours worked. So, if the employee is paid $400 a week and works 40 hours, their hourly rate is $10. If the employee works 50 hours, their hourly rate drops to $8.
The company is still required to pay overtime, but the fluctuating work week provides an alternate calculation for overtime. The steps are as follows:
Step 1: Determine the hourly rate.
The formula for this is - Salary/Hours Worked = Hourly Rate
Step 2: Determine the overtime due
The formula for this is - Hourly Rate x Overtime Hours x .5 = Overtime due
Example:
Fluctuating Work Week Overtime Calculation:
Salary: $400
Hours Worked: 50
Hourly Rate: $400/50 = $8
Overtime Due: $8 x 10 (hours over 40) x .5 = $40
Total pay for that week: $440
Standard Overtime Calculation:
(Hourly Rate x Regular Hours) + (1.5 Hourly Rate x Overtime Hours) = Weekly Pay
($10 x 40)+ ($15 x 10) = $400 + $150 = $550
Comparison:
Fluctuating work week method of calculating overtime saves the company $110.
The savings comes in the overtime premium. The standard method of calculating the overtime premium is 1.5x the hourly rate. The fluctuating work week presumes that the 1x the hourly rate was paid in the salary, thus leaving only .5x the hourly rate for the overtime premium.
A Note about Salaried Pay:
In order to take advantage of paying an employee on a salaried basis the company may not reduce the salary level if the employee works less than 40 hours.
The idea is that the employer gains benefit by paying on a salaried basis if the employee works more than 40 hours (decreasing the hourly rate), so there must be an equivalent benefit for the employee by maintaining the same level of pay for fewer hours (increasing the hourly rate).
This is why I rarely recommend paying employees on a salaried non-exempt basis. In short, it creates obligation to pay the employee a fixed amount, which may or may not work out in the company's favor.
Back to the Problem:
The point is that while there is potential value in utilizing the salaried non-exempt/fluctuating work week method of calculating overtime, paying someone on a salaried non-exempt basis is not a method of avoiding overtime payments.
Failure to properly pay the non-exempt employee overtime is perilous for the company.
The Peril:
There are two elements of liability with regard to violating the FLSA.
The first is based on the employee's right to file suit. Generally the employee is allowed to seek back pay for the previous two years (three years in the case of a willful violation) and an equal amount as liquidated damages, plus attorney's fees and court costs.
The company mentioned above has created a large level of exposure. An estimated 20 employees are impacted by their current pay policy. Presuming these employees average $30,000 a year and work an average of 5 hours of overtime per week and presuming that the violations are not found to be willful, the company faces exposure of $150,000 in back pay, plus an equal amount in liquidated damages. This is in addition to attorney's fees and court costs.
The second area of liability is with regard to penalties assessed by the DOL. Even if the employee does not bring suit, the DOL will require the payment of back wages. In the example above, $150,000.
If the violation is found to be willful, employers may be criminally prosecuted and fined up to $10,000. A second violation may result in imprisonment.
Employers who repeatedly or willful violate the minimum wage or overtime provisions are subject to civil money penalties of up to $1,100 per violation.
Ignorance is Risk:
As you can see, even if the company can claim ignorance, it faces large costs for violations of the FLSA. The "head in the sand" approach to human resources is not fruitful. It may save some costs in the short-term, but in the long-term the exposure is too large to ignore.
The Take Away:
If you are paying non-exempt employees in a salaried basis, review your practices to ensure that you are abiding by the FLSA regulations. Periodic payroll audits are always a good idea and it may be time to start one. If you don't have the in-house capacity to do it, HR Consult Team can help.
Works Cited:
http://www.dol.gov/whd/overtime_pay.htm
Wednesday, April 13, 2011
Fair Labor Standards Act (FLSA) Update
My in-house editor is out-of-the-house for a few days, so this blog post comes with a warning: Grammar and spelling may be incorrect.
On April 5, 2011, the DOL issued the publication titled: Updating Regulations Issued Under the Fair Labor Standards Act; Final Rule. (sometimes referred to as the Update)
Many of the changes are based on statutory amendments to the FLSA over the past few years. A good example is the The U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, which included an amendment to the FLSA that increased the applicable Federal minimum wage over the course of three years, bringing it to the current rate of $7.25.
There were a few changes which were not merely a formality. This post focuses on the Fluctuating Work Week and Tip Wage Credit provisions of the FLSA.
Fluctuating Work Week:
Fluctuating Work Week, which is known to some as Salaried Non-Exempt, is based upon the employee receiving a set salary per week, regardless of the total number of hours worked. If the employee works less than 40 hours, they get their straight salary. If the employee works over 40 hours, then the total hours worked is divided by the total salary to determine the hourly rate. The overtime rate is then calculated as .5x the hourly rate and paid on all hours over 40.
The DOL did not implement proposed changes which would have made it clear that an employee may be paid bonuses or other non-overtime premiums without invalidating the fluctuating workweek pay method.
The DOL received many opinions from both sides of the argument. In the end, the DOL felt that:
"unless such payments are overtime premiums, they are incompatible with the fluctuating workweek method of computing overtime under section 778.114. As several commenters noted, the proposed regulation could have had the unintended effect of permitting employers to pay a greatly reduced fixed salary and shift a large portion of employees' compensation into bonus and premium payments, potentially resulting in wide disparities in employees' weekly pay depending on the particular hours worked."
(http://edocket.access.gpo.gov/2011/2011-6749.htm)
So, in short - there is no change here, but it is interesting to note that the DOL recognizes the difference in salaried exempt and salaried non-exempt payments, and is striving to ensure the the non-exempt employees are ensured a relatively consistent method of payment.
Tip Credit:
For those employers taking advantage of the Tip Wage Credit, which allows an employer to pay below the standard minimum wage, the Update provides that the employer must inform an employee of the tip credit provisions or explain how the provisions work in order to take advantage of the credit. The Update indicates that the notice does not need to be in writing.
I want to stress that employers are well served by providing this information in writing and having the employees sign as having received the information. You will recall the three edicts of HR, Fair Treatment, Consistency, and Documentation.
In order to use the tip credit, the employer must inform the tipped employee of the following items PRIOR to utilizing the tip credit:
(1) The direct cash wage the employer is paying a tipped employee, which can
be more than, but cannot be less than, $2.13 per hour;
(2) the additional amount the employer is using as a credit against tips received, which cannot exceed the difference between the minimum wage specified in section 6(a)(1) of the FLSA and the actual cash wage paid by the employer to the employee;
(3) that the additional amount claimed by the employer on account of tips as the tip credit may not exceed the value of the tips actually received by the employee;
(4) that the tip credit shall not apply with respect to any tipped employee unless the employee has been informed of the tip credit provisions of section 3(m) of the Act; and
(5) that all tips received by the tipped employee must be retained by the employee except for the pooling of tips among employees who customarily and regularly receive tips. Furthermore, the current FLSA recordkeeping regulation, at 29 CFR 516.28(a)(3), expressly requires that the amount per hour that the employer takes as a tip credit shall be reported to the employee in writing each time it is changed from the amount per hour taken in the preceding week.
(http://edocket.access.gpo.gov/2011/2011-6749.htm)
Employers utilizing the tip credit (I am looking at you, Restaurant Industry) should be aware of the new requirements and ensure they are abiding by it in order to take advantage of the credit.
While not required by law, documentation of compliance is key to being able to defend your actions.
Other Topics:
Employee Commuting:
In short - commuting that occurs before the first principle workday activity or after the last principle activity in the workday is excluded from regular time, even if the employee utilizes an employer's vehicle (provided the use of the vehicle is subject to an agreement).
Meal Credit:
A proposed rule allowing employers requiring employees to accept a meal provided by the employer as a condition of employment and to take credit for no more than the actual cost of the meal, even if the acceptance is not voluntary, was not included in the Update.
The DOL determined that it needed further study regarding the extent to which dietary and religious restrictions impacted employees decision to consume the meal as well as whether or not adequate time is allowed for the employee to eat. While not weighing in this time, the DOL has not ruled out future guidance on the matter.
Compensatory Time:
The short and sweet is that the DOL states that public employers must grant compensatory time on the specific date requested by the employee, unless doing so would unduly disrupt the agency.
Given that this relates to public agencies, it is probably not all that interesting to most of you.
Works Cited:
http://edocket.access.gpo.gov/2011/2011-6749.htm
On April 5, 2011, the DOL issued the publication titled: Updating Regulations Issued Under the Fair Labor Standards Act; Final Rule. (sometimes referred to as the Update)
Many of the changes are based on statutory amendments to the FLSA over the past few years. A good example is the The U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, which included an amendment to the FLSA that increased the applicable Federal minimum wage over the course of three years, bringing it to the current rate of $7.25.
There were a few changes which were not merely a formality. This post focuses on the Fluctuating Work Week and Tip Wage Credit provisions of the FLSA.
Fluctuating Work Week:
Fluctuating Work Week, which is known to some as Salaried Non-Exempt, is based upon the employee receiving a set salary per week, regardless of the total number of hours worked. If the employee works less than 40 hours, they get their straight salary. If the employee works over 40 hours, then the total hours worked is divided by the total salary to determine the hourly rate. The overtime rate is then calculated as .5x the hourly rate and paid on all hours over 40.
The DOL did not implement proposed changes which would have made it clear that an employee may be paid bonuses or other non-overtime premiums without invalidating the fluctuating workweek pay method.
The DOL received many opinions from both sides of the argument. In the end, the DOL felt that:
"unless such payments are overtime premiums, they are incompatible with the fluctuating workweek method of computing overtime under section 778.114. As several commenters noted, the proposed regulation could have had the unintended effect of permitting employers to pay a greatly reduced fixed salary and shift a large portion of employees' compensation into bonus and premium payments, potentially resulting in wide disparities in employees' weekly pay depending on the particular hours worked."
(http://edocket.access.gpo.gov/2011/2011-6749.htm)
So, in short - there is no change here, but it is interesting to note that the DOL recognizes the difference in salaried exempt and salaried non-exempt payments, and is striving to ensure the the non-exempt employees are ensured a relatively consistent method of payment.
Tip Credit:
For those employers taking advantage of the Tip Wage Credit, which allows an employer to pay below the standard minimum wage, the Update provides that the employer must inform an employee of the tip credit provisions or explain how the provisions work in order to take advantage of the credit. The Update indicates that the notice does not need to be in writing.
I want to stress that employers are well served by providing this information in writing and having the employees sign as having received the information. You will recall the three edicts of HR, Fair Treatment, Consistency, and Documentation.
In order to use the tip credit, the employer must inform the tipped employee of the following items PRIOR to utilizing the tip credit:
(1) The direct cash wage the employer is paying a tipped employee, which can
be more than, but cannot be less than, $2.13 per hour;
(2) the additional amount the employer is using as a credit against tips received, which cannot exceed the difference between the minimum wage specified in section 6(a)(1) of the FLSA and the actual cash wage paid by the employer to the employee;
(3) that the additional amount claimed by the employer on account of tips as the tip credit may not exceed the value of the tips actually received by the employee;
(4) that the tip credit shall not apply with respect to any tipped employee unless the employee has been informed of the tip credit provisions of section 3(m) of the Act; and
(5) that all tips received by the tipped employee must be retained by the employee except for the pooling of tips among employees who customarily and regularly receive tips. Furthermore, the current FLSA recordkeeping regulation, at 29 CFR 516.28(a)(3), expressly requires that the amount per hour that the employer takes as a tip credit shall be reported to the employee in writing each time it is changed from the amount per hour taken in the preceding week.
(http://edocket.access.gpo.gov/2011/2011-6749.htm)
Employers utilizing the tip credit (I am looking at you, Restaurant Industry) should be aware of the new requirements and ensure they are abiding by it in order to take advantage of the credit.
While not required by law, documentation of compliance is key to being able to defend your actions.
Other Topics:
Employee Commuting:
In short - commuting that occurs before the first principle workday activity or after the last principle activity in the workday is excluded from regular time, even if the employee utilizes an employer's vehicle (provided the use of the vehicle is subject to an agreement).
Meal Credit:
A proposed rule allowing employers requiring employees to accept a meal provided by the employer as a condition of employment and to take credit for no more than the actual cost of the meal, even if the acceptance is not voluntary, was not included in the Update.
The DOL determined that it needed further study regarding the extent to which dietary and religious restrictions impacted employees decision to consume the meal as well as whether or not adequate time is allowed for the employee to eat. While not weighing in this time, the DOL has not ruled out future guidance on the matter.
Compensatory Time:
The short and sweet is that the DOL states that public employers must grant compensatory time on the specific date requested by the employee, unless doing so would unduly disrupt the agency.
Given that this relates to public agencies, it is probably not all that interesting to most of you.
Works Cited:
http://edocket.access.gpo.gov/2011/2011-6749.htm
Monday, April 11, 2011
E-Verify
On March 21, the U.S. Department of Homeland Security announced a new service that will allow individuals to check their own employment eligibility status. E-Verify Self-Check will be helpful in correcting errors before seeking employment. The program is slated to be nationwide within the next 12 months, but is currently active in Arizona, Colorado, Idaho, Mississippi, Virginia, and the District of Columbia.
(http://www.dhs.gov/ynews/releases/pr_1300711524714.shtm)
It is an interesting program that may help employers through reduced errors in the system. As it stands, if an employee receives a tentative non-confirmation (meaning there are issues found during the check, but not definitive enough to provide a final non-confirmation) the employee is allowed to contest and must remain employed until the final non-confirmation is supplied. By allowing employees to self-check, the hope is that employers will not be faced with employing individuals for a few weeks only to find that they are not eligible for employment.
The news release cited above combined with the likelihood of the Georgia Legislature passing House Bill 87/Senate Bill 40, requiring employers in GA to utilize the E-Verify System, prompted this blog post.
What is E-Verify:
As the United States Citizenship and Immigration Services (USCIS) describes it, E-Verify is an Internet-based system that compares information from an employee's Form I-9, Employment Eligibility Verification, to data from U.S Department of Homeland Security and Social Security Administration records to confirm employment eligibility.
USCIS indicates that nearly a quarter of a million businesses are currently using E-Verify with about a thousand more signing up each day.
Why Do It?
It is a simple way of ensuring that you don't have employees who are trying to cheat the system. Unfortunately, I have been on the receiving end of a call regarding an employee who wanted to "update her information" because she was now legal.
The Executive Director of a facility with which I worked informed me that one of her employees brought her a social security card and told her she was legal now and needed her information changed. The employee had been employed by the facility for nearly two years. She had provided falsified documentation that appeared sufficient for the purposes of the I-9. Of course, we had to terminate the employee.
Losing an employee who had worked for two years is problematic on many fronts. We had invested in this employee, and she had become a member of the organization only to be terminated. We were then required to start looking for her replacement, costing us time and money.
Additionally, Georgia employers should be aware that House Bill 87/Senate Bill 40, if passed, will require employers to utilize the system. As noted above, passage is likely, and it is better to be prepared by enrolling in E-Verify now.
What HR Consult Team Can Do:
HR Consult Team is in the process of becoming an E-Verify Employer Agent. This means that HR Consult Team will be able to assist employers with the following:
- Enrolling companies and updating their profile information
- Registering new users
- Creating user accounts for other Program Administrators and General
Users
- Creating and managing cases
- Viewing reports
- Updating profile information for other Program Administrators and
General Users
- Unlocking user accounts
From the looks of things it is only a matter of time until House Bill 87/Senate Bill 40 will pass and employers will be obligated to utilize the E-Verify system. HR Consult Team will help companies with the transition and administration of E-Verify.
(http://www.dhs.gov/ynews/releases/pr_1300711524714.shtm)
It is an interesting program that may help employers through reduced errors in the system. As it stands, if an employee receives a tentative non-confirmation (meaning there are issues found during the check, but not definitive enough to provide a final non-confirmation) the employee is allowed to contest and must remain employed until the final non-confirmation is supplied. By allowing employees to self-check, the hope is that employers will not be faced with employing individuals for a few weeks only to find that they are not eligible for employment.
The news release cited above combined with the likelihood of the Georgia Legislature passing House Bill 87/Senate Bill 40, requiring employers in GA to utilize the E-Verify System, prompted this blog post.
What is E-Verify:
As the United States Citizenship and Immigration Services (USCIS) describes it, E-Verify is an Internet-based system that compares information from an employee's Form I-9, Employment Eligibility Verification, to data from U.S Department of Homeland Security and Social Security Administration records to confirm employment eligibility.
USCIS indicates that nearly a quarter of a million businesses are currently using E-Verify with about a thousand more signing up each day.
Why Do It?
It is a simple way of ensuring that you don't have employees who are trying to cheat the system. Unfortunately, I have been on the receiving end of a call regarding an employee who wanted to "update her information" because she was now legal.
The Executive Director of a facility with which I worked informed me that one of her employees brought her a social security card and told her she was legal now and needed her information changed. The employee had been employed by the facility for nearly two years. She had provided falsified documentation that appeared sufficient for the purposes of the I-9. Of course, we had to terminate the employee.
Losing an employee who had worked for two years is problematic on many fronts. We had invested in this employee, and she had become a member of the organization only to be terminated. We were then required to start looking for her replacement, costing us time and money.
Additionally, Georgia employers should be aware that House Bill 87/Senate Bill 40, if passed, will require employers to utilize the system. As noted above, passage is likely, and it is better to be prepared by enrolling in E-Verify now.
What HR Consult Team Can Do:
HR Consult Team is in the process of becoming an E-Verify Employer Agent. This means that HR Consult Team will be able to assist employers with the following:
- Enrolling companies and updating their profile information
- Registering new users
- Creating user accounts for other Program Administrators and General
Users
- Creating and managing cases
- Viewing reports
- Updating profile information for other Program Administrators and
General Users
- Unlocking user accounts
From the looks of things it is only a matter of time until House Bill 87/Senate Bill 40 will pass and employers will be obligated to utilize the E-Verify system. HR Consult Team will help companies with the transition and administration of E-Verify.
Wednesday, April 6, 2011
Not Employing the Unemployed
One of the hot topics of the few months has been the trend of discriminating against the unemployed. On February 16, 2011, the EEOC held a public meeting on the matter.
There are many pitfalls in the approach of a blanket ban on hiring the unemployed.
Being Employed Does Not Imply A Good Work Ethic:
In the EEOC's press release following the public meeting, Helen Norton, Associate Professor at University of Colorado School of Law, is cited as testifying that the correlation between current employment and a quality job performance is weak.
It is easy to recall dealing with bad employees. Consider any time you have been subject to poor service, costly mistakes, or a lackadaisical attitude from an employee of a company with which you do service. The point is, even looking at the proposition anecdotally, one can see the lack of correlation between having a job and being a good employee.
If the correlation between being employed and being a good employee is weak, then there is little benefit in limiting the pool of applicants strictly to the employed. Likewise, this makes the practice arbitrary and thus subject to scrutiny by the EEOC. Employers are better served utilizing tools such as pre-employment testing to identify strong candidates for a position. As with any selection measure, it should be job related.
Unemployment is Costly to Society:
Consider the fact that unemployed individuals result in costs to society. Fatima Gross Graves, Vice President for Education and Employment of the National Women's Law Center, noted the negative impact to the government efforts to get people back to work.
The unemployment rate is certainly a measure of the state of the economy. While the rate is known to be a lagging indicator of economic success, it is one that is widely watched by the public. By actively denying employment to the unemployed, companies create an extra burden to the government and propagate high unemployment.
Disparate Impact:
The reason the EEOC held a public meeting on the matter is that a ban on hiring the unemployed creates potential for disparate impact. In case you missed my blog covering unintentional discrimination, disparate impact occurs when an employment practice excludes minorities at a higher rate than non-minorities.
Consider the statistics reported by the Bureau of Labor Statistics in the March 2011 Employment Situation report.
Click to enlarge
(http://www.bls.gov/news.release/pdf/empsit.pdf)
Note that in March of 2011 Hispanics (11.3%) and Blacks (15.5%) have significantly higher unemployment rates than whites (7.9%). Older workers and the disabled are also minority groups that are likely to be negatively impacted by this type of policy.
By denying employment to the unemployed, the company could be excluding minorities at a significantly higher rate and thus face exposure either to a law suit or a discrimination claim.
The Take Away:
Basing hiring decisions on current employment does not create value but does create exposure for a company. Companies should avoid implementing such procedures. If a company wishes to improve the selection process, it should focus on validated and reliable tests that have been shown to have a strong correlation to success in employment.
Works Cited:
http://www.eeoc.gov/eeoc/newsroom/release/2-16-11.cfm
http://www.bls.gov/news.release/pdf/empsit.pdf
There are many pitfalls in the approach of a blanket ban on hiring the unemployed.
Being Employed Does Not Imply A Good Work Ethic:
In the EEOC's press release following the public meeting, Helen Norton, Associate Professor at University of Colorado School of Law, is cited as testifying that the correlation between current employment and a quality job performance is weak.
It is easy to recall dealing with bad employees. Consider any time you have been subject to poor service, costly mistakes, or a lackadaisical attitude from an employee of a company with which you do service. The point is, even looking at the proposition anecdotally, one can see the lack of correlation between having a job and being a good employee.
If the correlation between being employed and being a good employee is weak, then there is little benefit in limiting the pool of applicants strictly to the employed. Likewise, this makes the practice arbitrary and thus subject to scrutiny by the EEOC. Employers are better served utilizing tools such as pre-employment testing to identify strong candidates for a position. As with any selection measure, it should be job related.
Unemployment is Costly to Society:
Consider the fact that unemployed individuals result in costs to society. Fatima Gross Graves, Vice President for Education and Employment of the National Women's Law Center, noted the negative impact to the government efforts to get people back to work.
The unemployment rate is certainly a measure of the state of the economy. While the rate is known to be a lagging indicator of economic success, it is one that is widely watched by the public. By actively denying employment to the unemployed, companies create an extra burden to the government and propagate high unemployment.
Disparate Impact:
The reason the EEOC held a public meeting on the matter is that a ban on hiring the unemployed creates potential for disparate impact. In case you missed my blog covering unintentional discrimination, disparate impact occurs when an employment practice excludes minorities at a higher rate than non-minorities.
Consider the statistics reported by the Bureau of Labor Statistics in the March 2011 Employment Situation report.
Click to enlarge
(http://www.bls.gov/news.release/pdf/empsit.pdf)
Note that in March of 2011 Hispanics (11.3%) and Blacks (15.5%) have significantly higher unemployment rates than whites (7.9%). Older workers and the disabled are also minority groups that are likely to be negatively impacted by this type of policy.
By denying employment to the unemployed, the company could be excluding minorities at a significantly higher rate and thus face exposure either to a law suit or a discrimination claim.
The Take Away:
Basing hiring decisions on current employment does not create value but does create exposure for a company. Companies should avoid implementing such procedures. If a company wishes to improve the selection process, it should focus on validated and reliable tests that have been shown to have a strong correlation to success in employment.
Works Cited:
http://www.eeoc.gov/eeoc/newsroom/release/2-16-11.cfm
http://www.bls.gov/news.release/pdf/empsit.pdf
Tuesday, April 5, 2011
NELP's Case for Reforming Background Checks for Employment
The National Employment Law Project (NELP) released an interesting publication titled "The Case for Reforming Background Checks for Employment" (hereafter The Case). The Case can be found here
http://www.nelp.org/page/-/SCLP/2011/65_Million_Need_Not_Apply.pdf?nocdn=1
The publication focused on employers expressly excluding any applicants with a criminal record, thereby creating exposure relative to Title VII. Following are highlights from several sections of the publication.
Shutting Workers with Criminal Records Out of the Job Market Compromises the Economy and Public Safety:
The article cites a study completed in Illinois which concluded recidivism (multiple criminal offenses) is decreased when individuals are engaged in a steady employment relationship. The study followed 1,600 individuals released from state prison. Those individuals who were employed for a year had an 8% recidivism rate, compared to the state average of 54%. While certain positions should require the applicant to pass a criminal background check, blanket restrictions could have a negative impact on public safety by increasing the likelihood of repeat offenses.
Beyond the public safety argument, this section of The Case draws attention to the economic impact of creating a large population of unemployable citizens. The authors of the report note the strain on the economy in terms of the cost of incarceration and the reduced productivity of these individuals.
Overly Broad Hiring Restrictions Run Afoul of Federal Laws Regulating Criminal Background Checks for Employment
The EEOC has been explicit about the disparate impact of utilizing criminal records as a means of employment selection. While the EEOC has not prohibited the use of criminal records, it has provided guidelines regarding the use of those records.
The EEOC recommends that employers complete an individualized assessment of each case, focusing on the nature and gravity of the offense(s), the time that has passed since the conviction and/or completion of the sentence, and the nature of the job held or sought.
To add to the constraints from the EEOC, the publication cites that FBI background checks are out of date 50% of the time. The article goes a step further to point out that commercially produced background checks have been found to be rife with inaccuracies.
The Case cites a statement from the EEOC's Policy Statement on the Issue of Conviction Records under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq. (1982), Feb. 4, 1987, which provides clear guidance that, "an absolute bar to employment based on the mere fact that an individual has a conviction record is unlawful under Title VII"
Wave of Lawsuits Documents Routine Civil Rights and Consumer Protection Violations:
The publication cites five major cases filed in 2010 regarding the misuse of criminal background checks to deny employment. One of the employers cited was the US Census Bureau.
Another case cited was the investigation of RadioShack for denying employment to an applicant who answered "yes" to a question about being convicted of a crime in the previous 7 years. The sobering part of this case is that ChoicePoint, a leader in the background check industry accounting for 20% of the market share, helped RadioShack establish the discriminatory practices.
What to do?
The Case goes on to recommend legal changes to help eliminate the issues brought up in the publication. In the meantime, employers should avoid blanket rules with regard to background checks. At a minimum, keep the EEOC guidance in mind and review each case based on the following:
- The nature and gravity of the offense(s);
- The time that has passed since the conviction and/or completion of sentence; and
- The nature of the job held or sought.
Of those three, the easiest place to start is the nature of the job held or sought. By eliminating background checks for those positions where it would be unnecessary, the employer can prevent much of the exposure associated with criminal background checks.
After establishing a case for completing criminal background checks on specific positions, the employer should review each applicants criminal history to determine if the record is sufficient to support prohibiting employment.
Works Cited:
http://www.nelp.org/page/-/SCLP/2011/65_Million_Need_Not_Apply.pdf?nocdn=1
http://www.nelp.org/page/-/SCLP/2011/65_Million_Need_Not_Apply.pdf?nocdn=1
The publication focused on employers expressly excluding any applicants with a criminal record, thereby creating exposure relative to Title VII. Following are highlights from several sections of the publication.
Shutting Workers with Criminal Records Out of the Job Market Compromises the Economy and Public Safety:
The article cites a study completed in Illinois which concluded recidivism (multiple criminal offenses) is decreased when individuals are engaged in a steady employment relationship. The study followed 1,600 individuals released from state prison. Those individuals who were employed for a year had an 8% recidivism rate, compared to the state average of 54%. While certain positions should require the applicant to pass a criminal background check, blanket restrictions could have a negative impact on public safety by increasing the likelihood of repeat offenses.
Beyond the public safety argument, this section of The Case draws attention to the economic impact of creating a large population of unemployable citizens. The authors of the report note the strain on the economy in terms of the cost of incarceration and the reduced productivity of these individuals.
Overly Broad Hiring Restrictions Run Afoul of Federal Laws Regulating Criminal Background Checks for Employment
The EEOC has been explicit about the disparate impact of utilizing criminal records as a means of employment selection. While the EEOC has not prohibited the use of criminal records, it has provided guidelines regarding the use of those records.
The EEOC recommends that employers complete an individualized assessment of each case, focusing on the nature and gravity of the offense(s), the time that has passed since the conviction and/or completion of the sentence, and the nature of the job held or sought.
To add to the constraints from the EEOC, the publication cites that FBI background checks are out of date 50% of the time. The article goes a step further to point out that commercially produced background checks have been found to be rife with inaccuracies.
The Case cites a statement from the EEOC's Policy Statement on the Issue of Conviction Records under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq. (1982), Feb. 4, 1987, which provides clear guidance that, "an absolute bar to employment based on the mere fact that an individual has a conviction record is unlawful under Title VII"
Wave of Lawsuits Documents Routine Civil Rights and Consumer Protection Violations:
The publication cites five major cases filed in 2010 regarding the misuse of criminal background checks to deny employment. One of the employers cited was the US Census Bureau.
Another case cited was the investigation of RadioShack for denying employment to an applicant who answered "yes" to a question about being convicted of a crime in the previous 7 years. The sobering part of this case is that ChoicePoint, a leader in the background check industry accounting for 20% of the market share, helped RadioShack establish the discriminatory practices.
What to do?
The Case goes on to recommend legal changes to help eliminate the issues brought up in the publication. In the meantime, employers should avoid blanket rules with regard to background checks. At a minimum, keep the EEOC guidance in mind and review each case based on the following:
- The nature and gravity of the offense(s);
- The time that has passed since the conviction and/or completion of sentence; and
- The nature of the job held or sought.
Of those three, the easiest place to start is the nature of the job held or sought. By eliminating background checks for those positions where it would be unnecessary, the employer can prevent much of the exposure associated with criminal background checks.
After establishing a case for completing criminal background checks on specific positions, the employer should review each applicants criminal history to determine if the record is sufficient to support prohibiting employment.
Works Cited:
http://www.nelp.org/page/-/SCLP/2011/65_Million_Need_Not_Apply.pdf?nocdn=1
Monday, April 4, 2011
The Value of Calculation: Return on Investment
Cost of Turnover blah blah blah blah blah. There is no shortage of articles and blog posts (including my own) touting the ridiculously high cost of turnover. Well, ok, fine, we know that turnover is costly and should be avoided. We know that better hiring practices will help. We know that retention efforts will help as well.
From a business perspective, we should always look at the cost of any action we take. Engaging in a good old cost benefit analysis will help us determine which action is likely to be the most efficient and effective.
For example, how does the cost of improving hiring results and/or the cost of improving retention measure up against the cost of turnover? What is our Return on Investment (ROI)?
Of course, strictly bottom-line thinking may miss the subtleties of the cost of turnover, such as loss of institutional knowledge, reduced productivity, etc. Still, any analysis is better than none. So let's get to analyzing.
Cost of Turnover:
The cost of turnover is generally viewed as anywhere from 33% of the employee's annual salary to 300% of an employee's annual salary. Part of the discrepancy is the inability to strictly account for the costs utilized in determining the cost of turnover. Other discrepancies come in to play as well, like the hourly rate of the employee creating the advertisements, reviewing resumes, and conducting interviews.
The Sasha Corporation looked at the cost of turnover for an $8 employee as reported by 15 different organizations, including the Society for Human Resource Management and Cornell University. Their meta-analysis revealed that the average cost was $9,444.47. When they removed the highest 5 estimates, that number fell to $5,505.80. (http://www.sashacorp.com/turnframe.html)
Considering an $8 an hour employee would earn about $16k annually, working 40 hours a week with no overtime, means that the average fell between 33% and 56% of the employee's annual wage. Of course, this should be balanced against the fact that replacing an $8 an hour employee is generally less costly than replacing a $30 an hour employee.
JDA Professional Services calculates the cost of replacing an employee earning $60,000 a year as being $150,000 or 250% of the employee's annual salary. The chart below shows the calculation:
(Click image to enlarge)
(http://www.jdapsi.com/Client/articles/coh)
For the purposes of this blog post, let's presume the average cost of replacing a professional employee earning $60,000 a year to be closer to 150% of his or her annual salary. I arrived at 150% by removing the cost of pre-employment testing, recruiter fees, salary increases, sign-on bonus, relocation, training, and consulting fees from the JDA Professional's estimate.
The Cost of Hiring:
Really, the cost of hiring is included in the cost of turnover. It would be foolish to account for this cost twice. Any increase in the cost of hiring will equally increase the cost of turnover.
The way to view the cost of hiring is by looking at the increase in the cost of hiring as it impacts the turnover rate. For example, if you have 100 employees who all earn $60,000 a year, and you have 20% turnover, your annual cost of turnover (presuming 1.5x annual salary) would be $1.8 million (20 employees terminated x $60,000 (salary) x 1.5 (cost of turnover) = $1,800,000).
Again, presuming the cost of turnover to be approximately $90,000 per employee, let's consider a 10% increase in the cost of turnover due to spending more on pre-employment testing. This would result in the cost of turnover increasing to $99,000.
If the result were a 20% drop in turnover (16% turnover vs 20%), the annual cost of turnover would drop to $1,584,000.
The additional cost of hiring would equal $144,000, and the savings due to reduction in turnover would be $216,000. The net savings would be $72,000 or a 50% ROI.
The Cost of Retention:
So, through attrition and better hiring practices, you can help reduce your turnover rate. The idea is that in hiring employees who are better suited to be long-term hires, you reduce turnover.
What about the current staff who were hired before the implementation of pre-employment testing? Are you subject to waiting for them to leave before they can be replaced with long-term hires?
The truth is, I did not even want to ask the last question, given how obvious of a set-up it is. Of course you are not subject to waiting for them to leave.
The cost of retention includes factors like incentive programs, recognition programs, training, wage increases, better working conditions, better equipment, improved benefits, and creating clear career paths for employees.
The cost of these will vary, but JDA Professional Services calculates the cost in the following chart:
(Click image to enlarge)
(http://www.jdapsi.com/Client/articles/coh)
JDA Professional Services concludes that the cost of keeping an employee is significantly less than the cost of replacing that employee. Even compared to the lower cost I proposed ($90,000 for a $60,000 employee), JDA's estimate of the cost of retention is less than 1/4 of the cost of turnover.
Retention via Employee Relations:
Simply showing employees that they are valued and recognizing their contribution to the organization is a cost effective way of reducing turnover.
Recognition programs and Employee Problem Resolution policies are extremely helpful in decreasing the number of disgruntled employees. Employees want to know they are valued. This can be achieved through simple recognition programs, such as giving a pat on the back or acknowledging the employee at a company meeting.
Similarly, keeping an open door policy and encouraging employees to discuss any workplace problems with management is helpful in resolving the inevitable issues that do arise. It is important to keep the lines of communication open and to encourage employees to take advantage of their ability to improve their working conditions.
Of course, one could assign costs to these measures (time to resolve complaints x hourly value of employee resolving complaints, etc.), but even including those costs, the cost/benefit analysis is amazing.
Utilizing the figures above, if an employee whose hourly worth is $200 an hour spent 50 hours a year dealing with employee complaints and providing recognition, the cost would be $10,000. If these efforts resulted in one less termination of a $60,000 a year employee, the savings would be $80,000. That is an 800% ROI.
The Take-Away:
The cost of retention, turnover, and hiring vary by company and by position. The actual cost of each individual termination could vary even if the individuals worked at the same company in the same position. Outside factors such as the labor market can impact the amount of money necessary to replace an employee.
Knowing the cost of hire/turnover and retention helps business owners make educated decisions on how to best spend their time and money to reduce the turnover and thus improve organizational outcomes. With consistent long-term employees, organizations are better suited to obtain new customers and keep current customers.
Of course, while it is valuable to calculate on the front end to help in decision making, take heed of James Barlament's plea to review what you have done and to determine whether or not it was successful.
In the calculation above regarding increasing the cost of hire, we presumed what the impact to turnover was. Once you implement the program, you can measure the actual impact. If the reality shows that the cost does not provide a return, then the program should be revisited in order to improve outcomes.
Works Cited:
http://www.sashacorp.com/turnframe.html
http://www.jdapsi.com/Client/articles/coh
From a business perspective, we should always look at the cost of any action we take. Engaging in a good old cost benefit analysis will help us determine which action is likely to be the most efficient and effective.
For example, how does the cost of improving hiring results and/or the cost of improving retention measure up against the cost of turnover? What is our Return on Investment (ROI)?
Of course, strictly bottom-line thinking may miss the subtleties of the cost of turnover, such as loss of institutional knowledge, reduced productivity, etc. Still, any analysis is better than none. So let's get to analyzing.
Cost of Turnover:
The cost of turnover is generally viewed as anywhere from 33% of the employee's annual salary to 300% of an employee's annual salary. Part of the discrepancy is the inability to strictly account for the costs utilized in determining the cost of turnover. Other discrepancies come in to play as well, like the hourly rate of the employee creating the advertisements, reviewing resumes, and conducting interviews.
The Sasha Corporation looked at the cost of turnover for an $8 employee as reported by 15 different organizations, including the Society for Human Resource Management and Cornell University. Their meta-analysis revealed that the average cost was $9,444.47. When they removed the highest 5 estimates, that number fell to $5,505.80. (http://www.sashacorp.com/turnframe.html)
Considering an $8 an hour employee would earn about $16k annually, working 40 hours a week with no overtime, means that the average fell between 33% and 56% of the employee's annual wage. Of course, this should be balanced against the fact that replacing an $8 an hour employee is generally less costly than replacing a $30 an hour employee.
JDA Professional Services calculates the cost of replacing an employee earning $60,000 a year as being $150,000 or 250% of the employee's annual salary. The chart below shows the calculation:
(Click image to enlarge)
(http://www.jdapsi.com/Client/articles/coh)
For the purposes of this blog post, let's presume the average cost of replacing a professional employee earning $60,000 a year to be closer to 150% of his or her annual salary. I arrived at 150% by removing the cost of pre-employment testing, recruiter fees, salary increases, sign-on bonus, relocation, training, and consulting fees from the JDA Professional's estimate.
The Cost of Hiring:
Really, the cost of hiring is included in the cost of turnover. It would be foolish to account for this cost twice. Any increase in the cost of hiring will equally increase the cost of turnover.
The way to view the cost of hiring is by looking at the increase in the cost of hiring as it impacts the turnover rate. For example, if you have 100 employees who all earn $60,000 a year, and you have 20% turnover, your annual cost of turnover (presuming 1.5x annual salary) would be $1.8 million (20 employees terminated x $60,000 (salary) x 1.5 (cost of turnover) = $1,800,000).
Again, presuming the cost of turnover to be approximately $90,000 per employee, let's consider a 10% increase in the cost of turnover due to spending more on pre-employment testing. This would result in the cost of turnover increasing to $99,000.
If the result were a 20% drop in turnover (16% turnover vs 20%), the annual cost of turnover would drop to $1,584,000.
The additional cost of hiring would equal $144,000, and the savings due to reduction in turnover would be $216,000. The net savings would be $72,000 or a 50% ROI.
The Cost of Retention:
So, through attrition and better hiring practices, you can help reduce your turnover rate. The idea is that in hiring employees who are better suited to be long-term hires, you reduce turnover.
What about the current staff who were hired before the implementation of pre-employment testing? Are you subject to waiting for them to leave before they can be replaced with long-term hires?
The truth is, I did not even want to ask the last question, given how obvious of a set-up it is. Of course you are not subject to waiting for them to leave.
The cost of retention includes factors like incentive programs, recognition programs, training, wage increases, better working conditions, better equipment, improved benefits, and creating clear career paths for employees.
The cost of these will vary, but JDA Professional Services calculates the cost in the following chart:
(Click image to enlarge)
(http://www.jdapsi.com/Client/articles/coh)
JDA Professional Services concludes that the cost of keeping an employee is significantly less than the cost of replacing that employee. Even compared to the lower cost I proposed ($90,000 for a $60,000 employee), JDA's estimate of the cost of retention is less than 1/4 of the cost of turnover.
Retention via Employee Relations:
Simply showing employees that they are valued and recognizing their contribution to the organization is a cost effective way of reducing turnover.
Recognition programs and Employee Problem Resolution policies are extremely helpful in decreasing the number of disgruntled employees. Employees want to know they are valued. This can be achieved through simple recognition programs, such as giving a pat on the back or acknowledging the employee at a company meeting.
Similarly, keeping an open door policy and encouraging employees to discuss any workplace problems with management is helpful in resolving the inevitable issues that do arise. It is important to keep the lines of communication open and to encourage employees to take advantage of their ability to improve their working conditions.
Of course, one could assign costs to these measures (time to resolve complaints x hourly value of employee resolving complaints, etc.), but even including those costs, the cost/benefit analysis is amazing.
Utilizing the figures above, if an employee whose hourly worth is $200 an hour spent 50 hours a year dealing with employee complaints and providing recognition, the cost would be $10,000. If these efforts resulted in one less termination of a $60,000 a year employee, the savings would be $80,000. That is an 800% ROI.
The Take-Away:
The cost of retention, turnover, and hiring vary by company and by position. The actual cost of each individual termination could vary even if the individuals worked at the same company in the same position. Outside factors such as the labor market can impact the amount of money necessary to replace an employee.
Knowing the cost of hire/turnover and retention helps business owners make educated decisions on how to best spend their time and money to reduce the turnover and thus improve organizational outcomes. With consistent long-term employees, organizations are better suited to obtain new customers and keep current customers.
Of course, while it is valuable to calculate on the front end to help in decision making, take heed of James Barlament's plea to review what you have done and to determine whether or not it was successful.
In the calculation above regarding increasing the cost of hire, we presumed what the impact to turnover was. Once you implement the program, you can measure the actual impact. If the reality shows that the cost does not provide a return, then the program should be revisited in order to improve outcomes.
Works Cited:
http://www.sashacorp.com/turnframe.html
http://www.jdapsi.com/Client/articles/coh
Thursday, March 31, 2011
The Fear of Terminating and Employment At-Will
Georgia is an at-will state. That means that, absent an employment contract, employees have no guarantee of employment. The employment relationship is based upon mutual consent of both parties (employer and employee). Of course, there are limitations to the at-will rule, such as discrimination or retaliation.
In my experience, employers are sometimes scared to terminate employees. They fear it will result in a lawsuit or discrimination claim. To help alleviate this fear, I give the "at-will" lesson.
The "At-Will" Lesson:
I use this lesson most often when I am discussing problem employees who toe the line with regard to company policies, never quite committing a serious enough infraction to be terminated but always creating some level of workplace drama.
The lesson goes something like this:
- Can you terminate an employee for misconduct?
- Can you terminate an employee for chewing gum?
- Can you terminate an employee for wearing a blue shirt on a Tuesday?
- Can you terminate an employee for being homosexual?
With the note that it depends on the state in which you operate, the answer to the each question above is yes in Georgia.
At-will employment means you can terminate an employee at any time, with or without notice, for any reason not prohibited by law.
Seriously, any reason. I don't like you, you're fired...acceptable. I don't like people who wear blue, you're fired...acceptable. As one of my business advisers says: any reason, which includes a good reason, a bad reason, no reason, or a stupid reason, so long as it is not an illegal reason.
That being said, I don't recommend using the at-will doctrine unless it is the only choice.
Lo the Peril: Just Because You Can, Does not Mean You Should.
While the law does not prohibit termination for stupid reasons, it does not mean you are beyond scrutiny for doing so. If you terminate an employee who is a member of a protected class (sex, religion, color, national origin, race, disability, age) for "no reason," it will likely end up being a discrimination claim or a wrongful termination lawsuit, as it could appear that the real reason was discrimination.
The idea is that there is a reason for termination, and "no reason" is a pretext for a discriminatory reason. If an employee is fired without being given a reason, he or she is likely to presume the reason is illegal. The employee will feel wronged and will seek to right it, either by filing a claim with the EEOC or by seeking out an attorney.
Beyond the liability created by terminating for "no reason," the cost of turnover is significantly higher than the cost of retention. If you can address problems through disciplinary action and training, then that is the path to resolve them.
In short, it does not make good business sense to base terminations on stupid, bad, or no reason other than personal preference. It creates liability and costs the company money.
So, Why Mention It?
The knowledge of "at-will" employment is beneficial because it can alleviate an employer's fear relative to termination.
Looking at it from another point of view, what the "at-will" doctrine really states is, you cannot terminate an individual because of his or her color, religion, gender, age, disability, national origin, when an employee refuses sexual advances, or when the employee engages in a protected action such as trying to organize a union, complaining to the EEOC, or submitting a safety violation.
With those exceptions, termination is based upon employer or employee discretion, which is an important point to remember.
When Should I Utilize the "At-Will" Doctrine?
Ideally, a company would be able to address every conceivable problem through policy. It is just not feasible to do so, and even if you could, your employee manual would be overwhelming. Barring the possibility that your policy manual is thorough enough to cover every issue, you will likely have situations that arise which may warrant termination.
Even when an employee's performance is up to standards, and the employee has not violated any policies, he or she may still be negatively impacting the organization. Examples of this type of situation are when an employee does not work well with other employees, the employee's style of communication does not mesh with his or her supervisor's style of communication, the employee feels entitled, constantly complains, or has a generally negative attitude.
In the scenarios above, the employer may need to utilize the employment at-will doctrine as the reason for termination. Generally speaking, termination should be a "last option" and should follow orientation, training, searching for alternate solutions, and disciplinary action, with documentation of each step. When possible, employers should have the employee acknowledge in writing that each step was taken.
To provide an example, if an employer has a negative employee who completes her tasks, but complains about having to do them, the employer should address the issue by talking with the employee and documenting the conversation. Subsequent issues should likewise be addressed along with documentation of how they were addressed. If the problem continues, the employer can terminate employment, knowing that the company has a documented reason for termination if there is a need to defend the decision.
Remember Unemployment Costs:
One last thing to remember about utilization of the at-will doctrine is that terminating at-will does not prohibit the employee from obtaining unemployment wages. That being said, it is worthwhile to consider the negative impact the employee is having on the organization and determining if the cost of unemployment is worth removing the individual from the workplace.
Last Note:
Employers should embrace the employment at-will doctrine and provide constant reminders of at-will employment to employees throughout their policy manuals and any supplemental policy documents they distribute. By asserting that employment is "at-will," the employer maintains flexibility in making employment decisions.
In combination with the assertion of the at-will doctrine, employers should endeavor to help staff succeed, which includes orientation, training, and disciplinary action to address problems. Documentation is key when performing those duties, as it will help protect the organization if the employment actions are questioned.
In my experience, employers are sometimes scared to terminate employees. They fear it will result in a lawsuit or discrimination claim. To help alleviate this fear, I give the "at-will" lesson.
The "At-Will" Lesson:
I use this lesson most often when I am discussing problem employees who toe the line with regard to company policies, never quite committing a serious enough infraction to be terminated but always creating some level of workplace drama.
The lesson goes something like this:
- Can you terminate an employee for misconduct?
- Can you terminate an employee for chewing gum?
- Can you terminate an employee for wearing a blue shirt on a Tuesday?
- Can you terminate an employee for being homosexual?
With the note that it depends on the state in which you operate, the answer to the each question above is yes in Georgia.
At-will employment means you can terminate an employee at any time, with or without notice, for any reason not prohibited by law.
Seriously, any reason. I don't like you, you're fired...acceptable. I don't like people who wear blue, you're fired...acceptable. As one of my business advisers says: any reason, which includes a good reason, a bad reason, no reason, or a stupid reason, so long as it is not an illegal reason.
That being said, I don't recommend using the at-will doctrine unless it is the only choice.
Lo the Peril: Just Because You Can, Does not Mean You Should.
While the law does not prohibit termination for stupid reasons, it does not mean you are beyond scrutiny for doing so. If you terminate an employee who is a member of a protected class (sex, religion, color, national origin, race, disability, age) for "no reason," it will likely end up being a discrimination claim or a wrongful termination lawsuit, as it could appear that the real reason was discrimination.
The idea is that there is a reason for termination, and "no reason" is a pretext for a discriminatory reason. If an employee is fired without being given a reason, he or she is likely to presume the reason is illegal. The employee will feel wronged and will seek to right it, either by filing a claim with the EEOC or by seeking out an attorney.
Beyond the liability created by terminating for "no reason," the cost of turnover is significantly higher than the cost of retention. If you can address problems through disciplinary action and training, then that is the path to resolve them.
In short, it does not make good business sense to base terminations on stupid, bad, or no reason other than personal preference. It creates liability and costs the company money.
So, Why Mention It?
The knowledge of "at-will" employment is beneficial because it can alleviate an employer's fear relative to termination.
Looking at it from another point of view, what the "at-will" doctrine really states is, you cannot terminate an individual because of his or her color, religion, gender, age, disability, national origin, when an employee refuses sexual advances, or when the employee engages in a protected action such as trying to organize a union, complaining to the EEOC, or submitting a safety violation.
With those exceptions, termination is based upon employer or employee discretion, which is an important point to remember.
When Should I Utilize the "At-Will" Doctrine?
Ideally, a company would be able to address every conceivable problem through policy. It is just not feasible to do so, and even if you could, your employee manual would be overwhelming. Barring the possibility that your policy manual is thorough enough to cover every issue, you will likely have situations that arise which may warrant termination.
Even when an employee's performance is up to standards, and the employee has not violated any policies, he or she may still be negatively impacting the organization. Examples of this type of situation are when an employee does not work well with other employees, the employee's style of communication does not mesh with his or her supervisor's style of communication, the employee feels entitled, constantly complains, or has a generally negative attitude.
In the scenarios above, the employer may need to utilize the employment at-will doctrine as the reason for termination. Generally speaking, termination should be a "last option" and should follow orientation, training, searching for alternate solutions, and disciplinary action, with documentation of each step. When possible, employers should have the employee acknowledge in writing that each step was taken.
To provide an example, if an employer has a negative employee who completes her tasks, but complains about having to do them, the employer should address the issue by talking with the employee and documenting the conversation. Subsequent issues should likewise be addressed along with documentation of how they were addressed. If the problem continues, the employer can terminate employment, knowing that the company has a documented reason for termination if there is a need to defend the decision.
Remember Unemployment Costs:
One last thing to remember about utilization of the at-will doctrine is that terminating at-will does not prohibit the employee from obtaining unemployment wages. That being said, it is worthwhile to consider the negative impact the employee is having on the organization and determining if the cost of unemployment is worth removing the individual from the workplace.
Last Note:
Employers should embrace the employment at-will doctrine and provide constant reminders of at-will employment to employees throughout their policy manuals and any supplemental policy documents they distribute. By asserting that employment is "at-will," the employer maintains flexibility in making employment decisions.
In combination with the assertion of the at-will doctrine, employers should endeavor to help staff succeed, which includes orientation, training, and disciplinary action to address problems. Documentation is key when performing those duties, as it will help protect the organization if the employment actions are questioned.
Wednesday, March 30, 2011
An Acronym the Fonz would Love: the ADAAA
Ok, perhaps I could have tried harder with that title. You win.
With the release of the final rule of the Americans with Disabilities Act Amendments Act (ADAAA) on March 24th, the EEOC has provided employers with regulations on how the ADAAA is to be implemented. Luckily, the final rule is scaled back from the proposed rule in several areas, most importantly in the definition of disability.
In the final rule, the EEOC stepped away from the idea that certain impairments would consistently meet the definition of a disability. Instead, the EEOC provided a list of nine "rules of construction" intended to help guide the determination of what constitutes a disability. The EEOC did provide examples of impairments that could easily be determined to be disabilities including epilepsy, diabetes, cancer, HIV infection, and bipolar disorder.
Here is a link to the EEOC fact sheet on the final rule: http://www1.eeoc.gov//laws/regulations/adaaa_fact_sheet.cfm?renderforprint=1
Here is an updated link to the final rule: http://www.federalregister.gov/articles/2011/03/25/2011-6056/regulations-to-implement-the-equal-employment-provisions-of-the-americans-with-disabilities-act-as#p-3
The Nine Rules of Construction:
- Section 1630.2(j)(1)(i): Broad Construction; not a Demanding Standard - The term "substantially limits" is to be construed broadly, with the intent of expansive coverage as opposed to being a demanding standard.
- Section 1630.2(j)(1)(ii): Significant or Severe Restriction Not Required; Nonetheless, Not Every Impairment Is Substantially Limiting - The impairment and limitations should be compared to most of the general population to determine if it is in fact a disability.
- Section 1630.2(j)(1)(iii): Substantial Limitation Should Not Be Primary Object of Attention; Extensive Analysis Not Needed - Employers should focus more on compliance as opposed to whether an individual's impairment substantially limited a major life activity.
- Section 1630.2(j)(1)(iv): Individualized Assessment Required, But With Lower Standard Than Previously Applied - Employers must assess each individual to determine if the impairment substantially limits a major life activity.
- Section 1630.2(j)(1)(v): Scientific, Medical, or Statistical Analysis Not Required, But Permissible When Appropriate - It is not necessary for employers to utilize a scientific, medical, or statistical analysis when determining whether or not the impairment substantially limits a major life activity.
- Section 1630.2(j)(1)(vi): Mitigating Measures - Employers should not consider mitigating measures (with the exception of ordinary eyeglasses and/or contact lenses), including whether or not measures exists, but the individual refuses to use them. The EEOC provides examples of psychotherapy, behavioral therapy, and physical therapy to the list of mitigating measures employers should not consider in determining if there is a disability.
- Section 1630.2(j)(1)(vii): Impairments That Are Episodic or in Remission - Employers should remember that even if the impairment is in remission or is episodic, it still may be considered a disability if it would substantially limit a major life activity when active.
- Section 1630.2(j)(1)(viii): Substantial Limitation in Only One Major Life Activity Required - If the impairment only substantially limits one major life activity, it is sufficient to be considered a disability.
- Section 1630.2(j)(1)(ix): Effects of an Impairment Lasting Fewer Than Six Months Can Be Substantially Limiting - Employers should remember that even transitory or minor impairments may be significant and could be "sufficiently severe" and thus warrant disability status.
Expansion of the definition of “major life activities” through two non-exhaustive lists:
—The first list includes activities such as caring for oneself, performing manual tasks,seeing, hearing, eating, sleeping, walking, standing, sitting, reaching, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, interacting with others, and working, some of which the EEOC previously identified in regulations and sub-regulatory guidance, and some of which Congress additionally included in the Amendments Act;
—The second list included major bodily functions, such as functions of the immune system, special sense organs, and skin; normal cell growth; and digestive, genitourinary, bowel, bladder, neurological, brain, respiratory, circulatory, cardiovascular, endocrine, hemic, lymphatic, musculoskeletal, and reproductive functions, many of which were included by Congress in the Amendments Act, and some of which were added by the Commission as further illustrative examples.
With the release of the final rule of the Americans with Disabilities Act Amendments Act (ADAAA) on March 24th, the EEOC has provided employers with regulations on how the ADAAA is to be implemented. Luckily, the final rule is scaled back from the proposed rule in several areas, most importantly in the definition of disability.
In the final rule, the EEOC stepped away from the idea that certain impairments would consistently meet the definition of a disability. Instead, the EEOC provided a list of nine "rules of construction" intended to help guide the determination of what constitutes a disability. The EEOC did provide examples of impairments that could easily be determined to be disabilities including epilepsy, diabetes, cancer, HIV infection, and bipolar disorder.
Here is a link to the EEOC fact sheet on the final rule: http://www1.eeoc.gov//laws/regulations/adaaa_fact_sheet.cfm?renderforprint=1
Here is an updated link to the final rule: http://www.federalregister.gov/articles/2011/03/25/2011-6056/regulations-to-implement-the-equal-employment-provisions-of-the-americans-with-disabilities-act-as#p-3
The Nine Rules of Construction:
- Section 1630.2(j)(1)(i): Broad Construction; not a Demanding Standard - The term "substantially limits" is to be construed broadly, with the intent of expansive coverage as opposed to being a demanding standard.
- Section 1630.2(j)(1)(ii): Significant or Severe Restriction Not Required; Nonetheless, Not Every Impairment Is Substantially Limiting - The impairment and limitations should be compared to most of the general population to determine if it is in fact a disability.
- Section 1630.2(j)(1)(iii): Substantial Limitation Should Not Be Primary Object of Attention; Extensive Analysis Not Needed - Employers should focus more on compliance as opposed to whether an individual's impairment substantially limited a major life activity.
- Section 1630.2(j)(1)(iv): Individualized Assessment Required, But With Lower Standard Than Previously Applied - Employers must assess each individual to determine if the impairment substantially limits a major life activity.
- Section 1630.2(j)(1)(v): Scientific, Medical, or Statistical Analysis Not Required, But Permissible When Appropriate - It is not necessary for employers to utilize a scientific, medical, or statistical analysis when determining whether or not the impairment substantially limits a major life activity.
- Section 1630.2(j)(1)(vi): Mitigating Measures - Employers should not consider mitigating measures (with the exception of ordinary eyeglasses and/or contact lenses), including whether or not measures exists, but the individual refuses to use them. The EEOC provides examples of psychotherapy, behavioral therapy, and physical therapy to the list of mitigating measures employers should not consider in determining if there is a disability.
- Section 1630.2(j)(1)(vii): Impairments That Are Episodic or in Remission - Employers should remember that even if the impairment is in remission or is episodic, it still may be considered a disability if it would substantially limit a major life activity when active.
- Section 1630.2(j)(1)(viii): Substantial Limitation in Only One Major Life Activity Required - If the impairment only substantially limits one major life activity, it is sufficient to be considered a disability.
- Section 1630.2(j)(1)(ix): Effects of an Impairment Lasting Fewer Than Six Months Can Be Substantially Limiting - Employers should remember that even transitory or minor impairments may be significant and could be "sufficiently severe" and thus warrant disability status.
Expansion of the definition of “major life activities” through two non-exhaustive lists:
—The first list includes activities such as caring for oneself, performing manual tasks,seeing, hearing, eating, sleeping, walking, standing, sitting, reaching, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, interacting with others, and working, some of which the EEOC previously identified in regulations and sub-regulatory guidance, and some of which Congress additionally included in the Amendments Act;
—The second list included major bodily functions, such as functions of the immune system, special sense organs, and skin; normal cell growth; and digestive, genitourinary, bowel, bladder, neurological, brain, respiratory, circulatory, cardiovascular, endocrine, hemic, lymphatic, musculoskeletal, and reproductive functions, many of which were included by Congress in the Amendments Act, and some of which were added by the Commission as further illustrative examples.
Subscribe to:
Posts (Atom)
