“It is not necessary to change. Survival is not mandatory.” – W. Edwards Deming, Management Consultant and Educator
This issue discusses:
- Editor’s Column: Human Resource Information Technology
- What is an Impairment?
- Using Credit Checks
- Cyber Liability 101
- Second Opinions Under the ADA
We have also provided you with the Form of the Month.
Please click here to view this month’s newsletter in PDF format.
Editor’s Column: Human Resource Information Technology
Human resource operations also employ a variety of technology platforms for payroll, time and attendance, workforce planning and management, online recruiting, benefits administration, compliance management, performance management, compensation management, training management, enterprise resource planning, succession planning, and so forth. Human resources information systems (HRIS or HRMS) are consolidating these various HR disciplines. For years, large corporations have relied on firms such PeopleSoft, Oracle, UltiPro and others – while smaller companies work with such programs such as Sage/Abra, HR Office, People-Trak ADP, PayChex, and Ceridian. Today, companies with as few as 25 employees are evaluating the cost/benefit of employing HRIS systems.
The primary benefit of technology is the ability to reduce duplication of effort and inherent error by consolidation, analysis, storage, and reporting data. Payroll companies, insurers, and benefit providers will continue to offer human resource information platforms — PEOs, HROs and ASOs, as well as directly from vendors. Chances are you’ll be able to choose from a suite of integrated options.
Will the effort be worth it? In my experience, a lot can go wrong with these technologies. The payroll and time and attendance tie-in are especially important. Assuming all the bells and whistles work properly, the next question is “Who’s going to be excited about using the program?” Most HR people don’t run toward technology, they run away from it! It’s just not their thing. Although others will go along with it reluctantly in order to make their organization more efficient, they’ll tend to use technology programs at their lowest denominator. For example, most HRIS systems advertise how many different reports you can pull – sometimes hundreds or more. Chances are however, that most HR people don’t pull any reports and don’t use the program strategically. They tend to free up some time for open benefits enrollment and time keeping, but won’t help in hiring, managing, training, or compliance.
Suppose you’re a 100-person company considering a complete HRIS system that functions well and costs about $6-$10 per employee every month, for an annual total of $6,000 to $12,000 (plus set-up fees). Let’s say the program saves HR a month of time and the rest of the company another month combined – time spent on new hire paperwork, changing benefits, tracking vacation days, COBRA admin, etc. If the average employee is paid $50,000 then the “savings” is equal to two months at $4,000 each, for a total of $8,000. Compare these “savings” with the $6,000 to $12,000 price of the system, and you come out at close to a wash. That’s OK. Your system is tighter, with more effective information management, employee self service, etc. You might also justify this expense if it freed up HR to take on more strategic efforts, but is that what is happening?
I continue to believe that strategy trumps technology nearly every time. The poor hire of a $50,000/year employee dwarfs any savings an HRIS system can provide. Strategic thinking about how to attract and hire great employees is far more important than the technology interface you use for the hiring process. The strategy you use to retain employees has far greater significance than any report that you’ll generate about retention statistics. The future challenge of HRIS programs is to consolidate all aspects of HR without a glitch, while using them at a strategic level, not just as technological tool. This will require integration with strategic tools, content, and support (similar to what Members of HR That Works get!). In my experience, we’re not there yet.
Before the promise of new HR technologies traps you, be clear about the impact it can have on your organization. Determine exactly how much net time and money you’ll save, factor in the learning curve and data storage benefits. Then ask what strategic effort you will take on, given this freed up time!
What is an Impairment?
Responding to an HR That Works Member who asked if an employee’s short stature, which limited her performance, could be considered a disability, Beth Loy from JAN http://askjan.org/ provided this document that summarizes the definition of an impairment (an essential requirement for a covered disability), and provides a number of examples.
Using Credit Checks
Many HR That Works Members have asked about limitations on using credit checks under federal and state laws. Here’s the most recent EEOC “informal” discussion letter on this topic.
As of this date, four states (Illinois, Hawaii, Oregon, and Washington) have laws restricting the use of credit checks to employees in financially sensitive positions – never mind that an applicant or employee with poor credit is a greater overall “risk” for employers. The Illinois statute is typical in limiting credit checks to:
- Positions involving access to sensitive information
- Positions involving unsupervised access to cash or marketable assets valued at more than $2,500
- Positions with signatory power over business assets of $100 or more per transaction
- Managers who set the direction of or control a business
- Positions for which the employer is required by law to obtain a bond
- Positions for which state or federal law or regulation establishes credit history as a bona fide occupational qualification
- Positions for which the law requires employers to obtain credit history
This is one reason why we recommend that you work with our partner Global HR Research, who stays on top of these developments.
Cyber Liability 101
What is Cyber Liability?
In 1992, when I started our company and bought my first computer (a Gateway 33 mhz.), you couldn’t buy a “Cyber Liability” policy. Few people knew what a “website” was, and “security breaches” created images of Mission Impossible.
Flash forward to 2010 and issues arising out of data security, management of confidential information, and infringement of intellectual property rights are all considered major exposures. In today’s interconnected cyberworld, the potential for catastrophic loss has escalated dramatically. Although the early “hackers” seemed to be challenging themselves intellectually to see what type of mischief they could cause, today’s cyberthieves have serious criminal intent in mind. Terrorists, organized crime, and random computer geeks working alone are making cyber crime a growth industry. According to Privacy Rights Clearinghouse, more than 263 million data records of U.S. residents have suffered breaches since 2005.
Step one in the Cavignac & Associates Risk Management Process is “risk analysis: Identifying assets or circumstances which could lead to a loss.” This process, also known as “exposure analysis,” defines the assets or circumstances as “loss exposures.” Potential exposures include the loss of your company’s data and the cost of restoring it, defending against or settling a third party claim, cyber extortion, damage to reputation, notifying individuals whose personal information might have been compromised, and paying for credit monitoring of individuals (if required by law). Nearly every state now requires businesses that have compromised an individuals’ information to notify this individual. One study of larger companies estimated the cost of a data breach at $204 per compromised record. The same study calculated the average cost of a single data breach at $6.75 million!
Once you’ve defined your exposures, you need to determine how you can manage them. In other words, what can you do to lower the likelihood of a cyber liability claim or the severity of a claim if one occurs? A number of companies focus on helping businesses manage and protect both their own data and the data of their customers. The key is to centralize IT management and develop enforceable policies and procedures across your network. Check the implementation of these policies and procedures periodically. After a suspected or actual breach, take action as soon as possible. If necessary, call the appropriate IT security specialist companies.
Is This Risk Insurable?
As cyber liability exposures have evolved, so has insurance coverage. Although the Insurance Services Office (ISO) created a “standard” policy in November of 2009, most policies today are unique to the company offering the coverage. This means that you’ll need to evaluate the policy to make certain it addresses your potential exposures. These policies include both first party and third-party coverages. First-party coverage pays you for the costs of repairing or replacing damage caused by a covered peril; third party coverage includes the cost of defending and settling third-party claims, including regulatory actions.
Cyber Liability policies usually include some or all of these coverages:
- Website Publishing Liability – Nearly everyone has a website these days. This coverage protects you from liability-based information posted on your website, which might include actual or alleged misstatements; infringement of another’s copyright; trademark, etc., or violation of a person’s right to privacy.
- Security Breach Liability – Covers your liability from a security breach or transmission of a computer virus to a third party. A security breach occurs if an unauthorized person accesses the personal information of another, or if someone authorized to access such information uses it inappropriately.
- Programming Errors and Omissions Liability – Protects against your legal liability from actual or alleged programming errors that lead to disclosing a client’s personal information
- Replacement or Restoration of Electronic Data – This first-party coverage repays you for replacing or restoring data or programs damaged or destroyed as a direct result of a computer virus or similar bug.
- Extortion Threats – Reimburses you for extortion expenses and ransom payments resulting directly from an extortion threat. These threats usually involved on introducing a virus, malicious code, or publishing clients’ personal information.
- Business Income and Extra Expense – Covers loss of business income and extraordinary operating expenses due to a cyber incident or extortion threat.
- Public Relations Expense – Cyber liability incidents can create bad press. This covers the costs of a public relations firm to help you protect or restore your reputation after such an incident.
- Security Breach Expense – Covers the often significant expenses of notifying others that their personal information has been compromised These costs include overtime salaries for employees dealing with the issue, fees and costs of a company hired to operate a call center, post-event credit monitoring services, and other reasonable expenses.
Cost can vary dramatically, depending on the type of business, type and volume of information on file, and other factors. Because Cyber Liability insurance is a relatively new coverage, there’s not a large enough database to calculate rates. Most companies are basing their prices based on what they believe the exposure to be and what they think they can charge. Annual premiums for smaller firms (with fewer than 50 employees) will probably range from $1,000 to $10,000. Larger firms might expect to pay $15,000 to $25,000.
Every firm, regardless of size, should evaluate its exposure to this type of loss and determine what steps they can take to manage this type of potential claim. Finally, you should obtain a quotation for coverage. Even if you don’t buy the coverage, you should know the cost and make the conscious decision not to buy it as opposed to assuming you don’t want to afford it.
Managing a Security Breach
If you become aware of an actual or potential security breach, investigate it immediately! If personal information has been compromised, at a minimum, you should take these steps:
- Depending on the circumstances, contact local law enforcement, and if appropriate the FBI and possibly the U.S. Postal Inspection Service (if the fraud involves mail theft).
- Notify any businesses that the breach might affect.
- Notify any individuals whose personal information might have been compromised. Designate a contact person to coordinate the notification process.
- If the incident involves Social Security numbers, credit card information, or other sensitive personal information, contact the major credit bureaus.
- Remove any inappropriately posted information on your website immediately.
- Consult with counsel to make certain you’re complying with any applicable laws, specifically those pertaining to notification and credit monitoring.
- Notify your insurance advisor to determine if insurance might apply to the incident.
- If necessary, consider contacting your public relations consultant to help manage the process and protect your firm’s reputation.
Article Courtesy of Jeffrey Cavignac of Cavignac and Associates (www.cavignac.com). Jeff is a long-time HR That Works and Sitkins International member located in beautiful downtown San Diego.
Second Opinions Under the ADA
Last month one of our Members had to deal with a request for disability accommodation/leave that seemed contrived by the employee as a way to protect her job. The question was whether the company could send the employee for a second opinion from a doctor of their choice. Here is the response from Linda Batiste, counsel for JAN:
“In general, you can ask for a second opinion if you have insufficient information in the first opinion you received. For example, if an employee indicated she needs a certain accommodation, but the statement by the employee’s doctor does not provide you with all the information you need to justify the accommodation, you can require a second opinion.
“The following is from Disability-Related Inquiries and Medical Examinations of Employees under the ADA.
“May an employer require an employee to go to a health care professional of the employer’s (rather than the employee’s) choice when the employee requests a reasonable accommodation?
“The ADA does not prevent an employer from requiring an employee to go to an appropriate health care professional of the employer’s choice if the employee provides insufficient documentation from his/her treating physician (or other health care professional) to substantiate that s/he has an ADA disability and needs a reasonable accommodation. (55) However, if an employee provides insufficient documentation in response to the employer’s initial request, the employer should explain why the documentation is insufficient and allow the employee an opportunity to provide the missing information in a timely manner.(56) The employer also should consider consulting with the employee’s doctor (with the employee’s consent) before requiring the employee to go to a health care professional of its choice.(57)
“Documentation is insufficient if it does not specify the existence of an ADA disability and explain the need for reasonable accommodation.(58) Documentation also might be insufficient where, for example: (1) the health care professional does not have the expertise to give an opinion about the employee’s medical condition and the limitations imposed by it; (2) the information does not specify the functional limitations due to the disability; or, (3) other factors indicate that the information provided is not credible or is fraudulent. If an employee provides insufficient documentation, an employer does not have to provide reasonable accommodation until sufficient documentation is provided.
“Any medical examination conducted by the employer’s health care professional must be job related and consistent with business necessity. This means that the examination must be limited to determining the existence of an ADA disability and the functional limitations that require reasonable accommodation. If an employer requires an employee to go to a health care professional of the employer’s choice, the employer must pay all costs associated with the visit(s).(59)
“The Commission has previously stated that when an employee provides sufficient evidence of the existence of a disability and the need for reasonable accommodation, continued efforts by the employer to require that the individual provide more documentation and/or submit to a medical examination could be considered retaliation.(60) “However, an employer that requests additional information or requires a medical examination based on a good faith belief that the documentation the employee submitted is insufficient would not be liable for retaliation.
“May an employer require that an employee, who it reasonably believes will pose a direct threat, be examined by an appropriate health care professional of the employer’s choice?
“Yes. The determination that an employee poses a direct threat must be based on an individualized assessment of the employee’s present ability to safely perform the essential functions of the job. This assessment must be based on a reasonable medical judgment that relies on the most current medical knowledge and/or best objective evidence.(61) To meet this burden, an employer might want to have the employee examined by a health care professional of its choice who has expertise in the employee’s specific condition and can provide medical information that allows the employer to determine the effects of the condition on the employee’s ability to perform his/her job. Any medical examination, however, must be limited to determining whether the employee can perform his/her job without posing a direct threat, with or without reasonable accommodation. An employer also must pay all costs associated with the employee’s visit(s) to its health care professional.(62)
“An employer should be cautious about relying solely on the opinion of its own health care professional that an employee poses a direct threat where that opinion is contradicted by documentation from the employee’s own treating physician, who is knowledgeable about the employee’s medical condition and job functions, and/or other objective evidence. In evaluating conflicting medical information, the employer may find it helpful to consider: (1) the area of expertise of each medical professional who has provided information; (2) the kind of information each person providing documentation has about the job’s essential functions and the work environment in which they are performed; (3) whether a particular opinion is based on speculation or on current, objectively verifiable information about the risks associated with a particular condition; and, (4) whether the medical opinion is contradicted by information known to or observed by the employer (e.g., information about the employee’s actual experience in the job in question or in previous similar jobs).
Form of the Month
List of HR That Works Forms (PDF) – This list outlines all personnel forms available to HR That Works Members, along with their corresponding categories.
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