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
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