May 2012 Compliance and Culture Newsletter
“Stay current on your HR game. Just when you think you are winning the rat race, along comes faster rats.” —Alan Collins, Author, Unwritten HR Rules
This issue discusses:
- Editor’s Column: Four Big Questions
- What Employment Lawyers Are Learning
- New ADEA Regulations Focus on ‘Reasonable Factors Other Than Age’ Defense
- Who Owns Employees’ Social Media Accounts?
- HR: Getting Paid
- Temporary Workers, Temporary Risks
- Training Alone Doesn’t Meet FLSA ‘Learned Professional’ Exemption
- What’s the Verdict on Your Wellness Plan?
We have also provided you with the Form of the Month.
Please click here to view the newsletter in PDF.
Editor’s Column: Four Big Questions
During a recent webinar, I asked four polling questions. The responses reveal a lot about what’s going on at companies today.
1. Do you conduct traditional performance appraisals?
75% Yes / 25% No
Let me begin by saying I’m not a big fan of traditional performance appraisals. I believe that most companies continue to do them because they can’t think of an alternative. I have dug into performance management over the years and I agree with Dr. Deming, who stated that performance evaluations are more destructive to performance than beneficial. From a former trial lawyer’s perspective, they do little to protect a company when it comes to wrongful termination claims. Why don’t they work?
- Nobody likes to give them or likes to get them.
- All anybody really wants to know is if they’re getting a raise.
- If somebody gets a poor performance rating, it’s probably a management problem and not an employee problem.
- They’re too late — like telling a kid in December that they didn’t clean up their room in February.
- They’re never done honestly. Managers tend to slide to the comfortable middle or use evaluations as a tool of retribution and manipulation.
- Most importantly, they don’t improve performance. When I’ve surveyed employees and conducted focus groups, I’ve been told that what does improve performance is the dialogue entered into with the manager during the process. As I have preached, this dialogue should be an ongoing process and not a once a year event. Employees should know where they stand at all times.
What should you do instead? Start by making it a workshop for your entire company. What do the employees like about your current performance management process? What don’t they like? What would they like to see done instead? How can you present the performance management approach as something created through agreement?
Then make sure your process can answer the two most important questions of performance management:
- What are the most important things we do every day?(you’d be amazed at the variance in answers to that question)
- How do we know if we’re doing our jobs well without having to ask or without having to be told? (because we understand the benchmarks of quality so well)
Until you can ask these questions, circling 1 to 5 on some form is a waste of time.
I encourage all HR That Works members to watch the Performance Management Training Module video, as well as the ROWE (Results Only Work Environment) Webinar and others on performance management on the site. Please also look at the performance management personnel forms.
2. Is there anyone working at the company today who if they quit you would be relieved, as opposed to upset?
71% Yes / 29% No
This response doesn’t surprise me. I’ve asked this question in workshops hundreds of times. I always get a painful smile as an answer. So why are these people still at the company? Here are some possibilities:
- They’re related to ownership — the problem with nepotism.
- They’ve been there so long that ownership feels guilty about terminating them. The company is also afraid of age discrimination-type claims.
- Ownership or management might have formed a personal relationship with this person. Perhaps their families know each other. How can I fire Bob when we’ve been friends for 10 years?
- We’re afraid that the standard operating procedure will walk out the door with the employee. If we haven’t generated standard operating procedures and best practices then their intellectual capital leaves with this employee, even if they’re a poor one. This is one reason why it’s so important to build and document standard operating procedures as if you were trying to franchise your business.
- We fail to document their poor performance. This is one reason why lawyers tell employers to “document, document, document!” Make sure you train your management team on proper disciplinary and documentation procedures. To do this, see the Discipline and Termination Training Module on HR That Works.
- We don’t want be viewed as a bad person — nobody likes being a villain. We know that this person will be upset with us. We know they’re going to try to get other people upset with us. Heck, we might even be upset with ourselves, too.
Jack Welch famously cut out the bottom 10% of employees at GE every year while driving it to become the No. 1 company in its industry. He said it wasn’t being unkind to the 10%, but being kind to the other 90%. There’s wisdom in culling the herd, and any emotional baggage has to get out of the way if we want be a great company.
3. Do you have a written human resource plan for 2012?
64% No / 36% Yes
Chances are that your company has an overall business plan and, hopefully a sales and marketing plan as well. You might even have a plan for process improvement, etc. Why doesn’t the No. 1 line item at every company have a plan attached to it?
Understand this: If roughly two in three companies don’t plan HR practices then they’re putting themselves at a competitive disadvantage to the one in three who do! Who do you think will hire more effectively? Who do you think will have a higher employee retention rate? Who do you think will be the more productive workforce? Who do you think will conduct more training? Who do you think will get rid of dead weight more readily? Who will do a better job of limiting employment-related lawsuits?
So what’s stopping anybody? My answer: A misallocation of time and money. Having just completed the 2012 HR That Works survey, I can tell you that time is the overriding issue in this area. HR is an incredible opportunity that’s undervalued because we are stressed about our time. However, what we all know is that time and money aren’t true objections; they’re an allocation of resources. We tend to allocate our time and money where we get the highest return on investment. If you have any doubt about the return on investment of HR, then go through the HR That Works Cost Calculator.
4. Do you require employee suggestions?
67% No / 33% Yes
In my experience, none. Many years ago, Peter Drucker had lunch with a good friend of his, Martin Edelstein (the editor of Boardroom Classics). He asked Martin how his meetings were going. Martin answered, “Just like everybody’s meetings go.” Peter asked him if he requires his employees to provide suggestions at every meeting. His answer was, of course, “no.” Drucker suggested that he do so for his next meeting. That single suggestion changed the entire culture and business of Boardroom Classics to the point that they produced an excellent book and program called I-Power about it. We had them present a Webinar for us that is available to all HR That Works Members.
Dr. Deming taught that as a part of Total Quality Management, you need to have quality control circles that engage in what’s known as kaizen, or constant improvement. This suggestion revolutionized manufacturing worldwide. He also recommended that manufacturers build toward perfection, rather than toward a tolerance. This is one reason why Lexus brands itself as the “Relentless Pursuit of Perfection.”
Are you motivated to great HR practices? How long will it be until you start doing mandatory employee suggestions? Remember, none of us are as smart as all of us!
These four huge HR questions are related directly to the success of any business. They represent a competitive advantage and a provable ROI.
What Employment Lawyers Are Learning
Here’s a partial list of training topics available this year for California employment law attorneys. This list, which applies in every state, should give businesses fair warning about some types of litigation they might face:
- RIFS — How to Do It Right
- Insider Tips and Tactics — The Art of Taking a Killer Employment Deposition
- The NLRB: What Every Labor and Employment Lawyer Needs to Know
- Use of Liability Experts in Harassment Litigation
- Managing Leaves: A Practical Guide for Employers and Employees
- Wage & Hour Class Action Update
- Ground Zero: An Expert Approach to Interviewing Techniques
- Data Privacy: The New Frontier
- Tracking Them Down: Techniques for Finding Witnesses, Former Employees and Other Information
- Using Digital Evidence in Workplace Investigations
- The “New Hire” — Independent Contractor or Employee?
- ADR: Issues and Trends
- Litigating Harassment Cases: On the Job Harassment Because of Sex, Race or Other Protected Characteristics
- Wage & Hour Class Actions after AT&T Mobility v. Concepcion
Bear in mind that these are only a few potential sources of litigation.
New ADEA Regulations Focus on ‘Reasonable Factors Other Than Age’ Defense
In Smith v. City of Jackson, the U.S. Supreme Court found that the ADEA authorizes recovery in disparate-impact cases, but also decided that there’s no such liability when the impact is due to reasonable factors other than age. Thus, “reasonable factors other than age” can provide an important defense in an ADEA action. For several years, the EEOC has proposed rules and collected comments on regulations clarifying this defense. On March 31, 2012, the EEOC published its final Rule on the “reasonable factors other than age” defense.
The final Rule provides that a reasonable factor other than age is one that “is objectively reasonable when viewed from the position of a prudent employer mindful of its responsibilities under the ADEA under like circumstances.” Whether a non-age factor is the reason for differential treatment “depends on the basis of all the particular facts and circumstances surrounding each individual situation.” To prevail, the employer has the burden of persuasion and “must show that the employment practice was both reasonably designed to further or achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose in light of the particular facts and circumstances that were known, or should have been known.”
Employers should note a non-exhaustive list of considerations set forth in the Rule itself that can be taken into consideration to determine if the employment decision was based on a reasonable factor other than age. These considerations include:
- The extent to which the factor is related to the employer’s stated business purpose.
- The extent to which the employer defined the factor accurately and applied the factor fairly and accurately, including the extent to which managers and supervisors were given guidance or training about how to apply the factor and avoid discrimination.
- The extent to which the employer limited supervisors’ discretion to assess employees subjectively, particularly where the criteria that the supervisors were asked to evaluate are known to be subject to negative age-based stereotypes.
- The extent to which the employer assessed the adverse impact of its employment practice on older workers.
- The degree of harm to individuals within the protected age group, in terms of both the extent of injury and the numbers of persons adversely affected, and the extent to which the employer took steps to reduce the harm, in light of the burden of undertaking such steps.
The Rule clarifies, however, that the “reasonable factors” are not required elements, but rather, only “manifestly relevant to determining whether an employer demonstrates the RFOA defense.”
The final Rule takes effect on April 30, 2012.
Article courtesy of Worklaw® Network firm Shawe Rosenthal (www.shawe.com).
Who Owns Employees’ Social Media Accounts?
There is a new type of lawsuit in town: Employers and employees are fighting over ownership of Twitter handles, LinkedIn connections, Facebook pages, and more. In one case, a company sued, claiming that an executive’s Twitter followers belonged to the business and had a value of $2.50 each (for a total of $340,000). Similar lawsuits focus on the ownership of Facebook and LinkedIn accounts. Whose property are the followers and connections that employees create in the course of their employment? To what extent can non-competition or non-solicitation agreements prevent these former employees from announcing their departures and then inviting their followers and connections to move to a new account?
Another sticky wicket for employers involves former employees who have received glowing recommendations from managers, vendors, and others, which they will use against their former employers in litigation or to compete against them.
To minimize your exposure, I would recommend adding this language to your social media policy (we have added this language to the Sample Social Media Policy on HR That Works):
“Ownership of Social Media Accounts
“Any social media accounts created or supported by the company are the property of the company (“Company Account”). If an employee wants their own private accounts for non-work related reasons, then they should maintain it separately from the Company Account. Employee understands that at time of termination that any Company Account remains the proprietary property of the company, and that other company policies or agreements apply, including any of those related to trade secrets, non-competition, or non-solicitation where allowed by law. Employee agrees to provide access during and after employment for the account passwords of any Company Account social media site(s).”
HR: Getting Paid
The Society for Human Resources Management (SHRM) has issued its summary of pay for common HR positions by company size. Because the vast majority of HR That Works member companies have fewer than 1,000 employees, I can tell you that the average full-time HR executive at these businesses make between $74,500 and $131,300. Approximately two-thirds of them are eligible for long-term incentives, and 95% of them for short-term incentives. These incentives should increase their payout by about one-third. Here’s the point: Many small and medium-sized companies pay their HR managers well. In case you’re curious, the top-end compensation for HR executives at companies with 10,000 or more employees averages $450,000, with additional incentive payouts of approximately 50%! For those who take HR seriously — there’s good money in HR!
Temporary Workers, Temporary Risks
An article in the February edition of the Corporate Counsel, reviews the potential liabilities of working with temporary workers. According to the article, in July, August, and September of 2011 alone, businesses hired 53,000 new temporary workers. The article identifies five risks in hiring temps:
- Liability as a joint employer for numerous exposures, including wage and hour, discrimination and harassment, FMLA, ADA, and others.
- Entitlement of temporary employees to benefits (understanding employee eligibility is the key).
- Failure to provide temporary employees with reasonable accommodation.
- Returning a temporary employee to work after FMLA leave.
- Unsuccessful attempts to organize a bargaining unit that includes both regular employees and temps.
Training Alone Doesn’t Meet FLSA ‘Learned Professional’ Exemption
In the Ninth Circuit case, Solis v. the State of Washington, the U.S. Secretary of Labor filed a complaint against the Washington Department of Social and Health Services, alleging that the department failed to pay overtime to social workers. The DHS argument that these workers fell within the learned professional exemption failed because the degree requirements for social worker positions did not “plainly and unmistakably” include a specialized course of study related directly to these positions. The learned professional exemption applies to positions that require a “prolonged course of specialized instruction.” According to the court, if simply having extensive training sufficed to qualify as a specialized course of intellectual instruction, nearly every position with a formal training program would qualify. Businesses should construe these exemptions narrowly and the employer has the burden of showing the exemption applies.
See the FLSA Fact Sheet here.
What’s the Verdict on Your Wellness Plan?
Wellness plans have been all the rage for a number of years. Their ultimate goal is to reduce employer costs, while creating a more productive workforce. Otherwise, employers would have no interest in them. So how well are they doing? My personal experience working with many companies that either use or implement these programs tells me that it’s a mixed bag. Attempting to change long-standing health habits isn’t easy. Here are some of the challenges as I see them:
- It’s a top-down idea. Anytime a wellness program is thrust upon employees it feels like manipulation, whether the program benefits them or not. How can you make it their idea, too?
- Many employees don’t like being penalized for their personal habits, while their work habits are just fine. “I put in 50 hours a week, produce twice as much as anybody around here, and you’re going to make me pay more because I smoke a few cigarettes?” Tough case.
- Penalties only generate more stress. There’s talk about expanding the types of penalties available under wellness programs. Now people will be stressed about their finances, as well as about their health. Rather than giving employees incentives toward good conduct, it might lead them into even more destructive conduct.
- Leadership sets a bad example. An owner once complained to me about how expensive his healthcare was. An obese man, he then took me past the free vending machines in the lunchroom that provide his employees with candy, chips, and soda. How well do you think a wellness program will work at his company?
- Make it a team effort. Healthy employees are, on average, better employees. They’re more productive, have lower absenteeism rates, and fewer medical expenses. Aren’t these the type of workers you want? Encourage them to provide an example to the rest of the workforce. Less fit workers will respond far better to someone they work with every day than they will to some wellness trainer. Give healthy employees incentives to get three other employees to go to the gym with them on a regular basis. There’s no law against doing that.
Wellness is a great idea whose implementation is still at the early phases. To make our wellness programs more effective, we’ll need to do a lot of experiments.
Form of the Month
Privacy Checklist (PDF) – Workplace privacy is a growing employer concern. While this list is not meant to be exhaustive, nor cover every regulation, it will help you to avoid the vast majority of claims filed in this area.
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©2012 Reprinted with permission from HRThatWorks.com, a powerful program designed to inspire great HR practices.