Tag: risk management
“All labor that uplifts humanity has dignity and importance and should be undertaken with pain-staking excellence.” – Martin Luther King, Jr.
This issue discusses:
- Editor’s Column: 24 Recent Thoughts and Statements
- Does Telecommuting Work?
- A New HR Story
- Holiday Party Reminders & Religious Accommodation
- Managing Outrageously
- Random Thoughts About the Future of Work
- Question of the Month
We have also provided you with the Form of the Month.
Please click here to view the newsletter in PDF.
Editor’s Column: 24 Recent Thoughts and Statements
I do a lot of reading. Here are some thoughts inspired by the latest round:
- No person who produces from the heart will go for naught.
- Career success requires both inner and external engineering.
- As the scope of your life becomes bigger, less will be under your control.
- “I will be happy….. when” is meaningless. Be happy now!
- Comfort is an illusion if sought from the outside. Do you want to be comfortable or awesome?
- To map your career path, ask “Where can I help the most people with the least amount of energy?”
- When overwhelmed by information, we lose clarity of thought, which comes in the spaces between information – yet another reason to meditate.
- Do you identify with your limitations – and let them define you?
- Have these “limitations” blocked you from career success?
- Personal peace is about our internal chemistry. All happiness, despair, and other human experiences have a biochemical basis.
- Every person is an energy field functioning at different levels of capability.
- How loyal, engaged, and awesome do you want your people to be?
- You can’t bullshit yourself into wellbeing.
- Situations don’t make you – they expose you.
- Use time off to reward employees.
- Personality comes from the word persona, which in Greek drama meant a “mask.” Like a mask our personality is a construct – a story we tell ourselves about ourselves.
- All creativity is an imitation of nature.
- Conduct scavenger hunts, field trips, lunch-and-learns, suggestion meetings, crossword puzzles, jeopardy games, volunteer projects, blood donations, fun clubs, etc.
- If people feel good, they will ______________.
- Over-committed heroes end up becoming martyrs. Avoid this behavior pattern!
- Can you be peaceful where you are or must you go someplace to feel that way?
- HR’s focus on the negative does a disservice to human wellbeing.
- Work doesn’t cause stress; your reaction to it does.
- Have a plan for where you and your business will evolve.
Does Telecommuting Work?
In early 2013 Yahoo! CEO Marissa Mayer decided to eliminate telework, with an eye towards innovation and collaboration. “Some of the best insights come from hallway and cafeteria discussions, meeting new people and impromptu meetings,” said EVP of People and Development Jackie Reses, adding that “speed and quality are often sacrificed when we work from home.” Best Buy also announced it was canceling its Results Only Work Environment (ROWE) program, largely supported by telecommuters.
Many believe that occasional telecommuting allows people to deal with one-time events and promotes a less stressful work environment – however, it comes with a price!
To learn more about the pros and cons of this issue, check our Telecommuting That Works Training Program, which includes checklists, policies, forms, and a training video. If you don’t have access to HR That Works send an email to email@example.com and I’ll email you a copy of the report.
A New HR Story
Once upon a time, HR was viewed as a boring corporate wasteland “Oh no! Sally got transferred into the HR department… her career is over. Poor Sally!” Even though companies hired, managed, and fired people all the time, management still saw HR as an administrative backwater.
That view gradually changed. Books such as Good to Great helped owners and managers understand that hiring great people was essential for greatness; and that to do so required strategic initiative. They began seeing they couldn’t rely on yesterday’s performance management approaches, created in an industrial era, when working primarily with knowledge workers. Managers such as Jack Welch, Herb Kelleher, Howard Schultz, James Sinegal, and Tony Hsieh used a strategic HR approach to build great companies – GE, Southwest Airlines, Starbucks, Costco, and Zappos. The result: cutting-edge executives and managers realized that HR provided a competitive advantage.
Then the recession struck – and management neglected HR to concentrate on survival and building productivity. When the economy began recovering, valuable employees moved on to greener pastures, either working for themselves or for a company where they could feel fully engaged. Once again, businesses became desperate to reduce turnover and find good hires.
Tomorrow’s successful companies will win the talent wars by attracting and challenging the best, brightest, and most productive employees to grow and innovate for themselves and their employer. This shift in culture will have the unintended effect of reducing workers comp, employment practices, cyber-liability, and other insurance exposures – with HR helping lead the way.
Businesses will see HR as a strategic resource that’s as essential as sales, operations, and finance. That’s the new HR story.
Holiday Party Reminders & Religious Accommodation
Eggnog, latkes, old friends, parties – and a lot of beveraging! HR That Works wishes you a safe and happy holiday season! As the host of your company party, you have a legal obligation to make sure that attendees get home safe. Here’s our list of tips to help you meet this responsibility:
- Make party attendance voluntary.
- Hire bartenders trained to spot and handle intoxicated revelers.
- Provide non-alcoholic beverages.
- Give each guest a limited number of drink tickets, instead of an open bar.
- Serve filling food – not just chips and pretzels – whenever alcohol is available.
- Cut off alcohol service at least an hour before the party ends.
- Stop serving intoxicated guests immediately; don’t wait until they’re ready to leave.
- Never ask an apparently impaired guest if they’re able to drive home – they aren’t.
- Provide a taxi service for guests who require or request it.
- Have a friend or family member pick up intoxicated guests.
- Arrange for discounted rooms at the event location or a nearby hotel.
Finally, have a fun party. Think like good ‘ol Mr. Fezziwig!
Accommodating Religious Needs
The holiday season is an ideal time to focus on religious accommodation in in the workplace. Title VII of the Civil Rights Act of 1964 prohibits discrimination based on religion. We’ve seen more of these claims in recent years, with thousands of claims filed in 2012. Unsurprising, many of these cases include allegations of discrimination based national origin (i.e. someone claims discrimination because they’re of Arab origin, as well as Muslim).
The EEOC offers this definition of “religion:”
“In most cases, whether or not a practice or a belief is religious is not an issue. However, the EEOC defines religious practices to include moral or ethical beliefs as to what’s right and wrong, which are sincerely held with the strength of traditional, religious views. The fact that no religious group espouses such beliefs, or that the religious group to which the individual professes to belong might not accept such belief, will not determine whether the belief is a religious belief of the employee or prospective employee. The phrase ‘religious practices’ includes both religious observances and practices.” Also, bear in mind that:
- It’s unlawful for an employer to fail to accommodate reasonably the religious practices of an employee or prospective employee, unless the employer demonstrates that accommodation will mean undue hardship in conducting its business.
- An employer may not ask about an employee’s religious background unless justified by business necessity.”
For more information on religious expression in the workplace, check out: 1) EEOC guidelines and FAQS on religious discrimination: 2) an EEOC memo on accommodating religious expression; and 3) religious accommodation practices at the University of Missouri ( a great education, period).
I recently read an updated version of the book Marketing Outrageously by Jon Spoelstra. What I would like to focus on is a chapter in that book entitled Employees to Kill For. Anyplace that Spoelstra worked he pretty much followed the Southwest Airlines formula:
- Treat your employees fairly, inspire them and let them try outrageous things and they will work harder and smarter, more caringly, more outrageously, and they will not leave the company.
- This in turn will cause customers to love your company, because it has such happy employees, buying more, tell their friends about the outrageous company, and bring in new customers who will buy even more.
- This will in turn pleases shareholders and owners because of the increased buying, lower costs, higher profits, and more.
This is one of the things that drives me nuts about HR more than anything else—they have the opportunity to drive this initiative, which will in fact generate increased profits—yet few do! A few of Spoelstra’s ideas are as follows:
- Create a fun employee handbook. As I’ve often stated, we treat customers and clients in color but our employees in black and white. There’s no reason you can’t get your graphics folks to work on your employee handbook, no matter the size of your company. See the excellent example of the San Gabriel Valley YMCA employee handbook housed on HR That Works.
- Provide a free education. Spoelstra would typically pay half or more of an employee’s tuition no matter what subject they wished to study. If they wanted gardening lessons they’d pay for it. Golf lessons, they’d pay for it. The increase in self-esteem and energy this generated for employees more than paid for itself.
- Have a no miss policy. If you surround yourself with people who have a great work ethic, you don’t want to have them miss important family events. When he ran the New Jersey Nets, employees were not allowed to let work cause them to miss important functions. If they wanted to miss them for reasons of their own that was okay but they could not use work as an excuse.
- Forced vacations – Spoelstra was not a big fan of employees building up a vacation bank. He required them to use their vacation. They could not spend their vacation time at work and while they were on vacation they couldn’t phone in, not even once.
- A six-week paid sabbatical after working three years. The only requirement is they have to propose to do something a little more interesting than sitting on the beach, like helping out a nonprofit cause.
- Help people in negotiating their next job – Odds are your employees won’t be working for you forever. Spoelstra realized that there are times when it’s in an employee’s best interest to move on and it’s in the company’s best interest to help them do so in a constructive way. As he would explain to young staffers, “Because a lot of you are quickly developing valuable skills, other teams will want to steal you away. That’s okay. We don’t want to lose you, but we know each of you has your own career. If you can take a giant step along the career path with another team, we’ll help you. When another team approaches you, let us know; if it’s something you want to do, we’ll help you negotiate the best deal. We don’t want to lose you, but if we have to, we don’t want it to be for a piddling amount of money. We want you to get a lot more money and a lot more responsibility when you leave.”
There’s a reason why Spoelstra was able to turn around every single organization he ever went to and make himself quite wealthy in the process. And, there’s absolutely no reason why these insights can’t be applied at your company.
Random Thoughts About the Future of Work
- Years ago Buckminster Fuller surmised in his book The Critical Path that because of computer and robot technology we would arrive at a place where few of us had to go to work. This is similar to predictions made at the beginning of the manufacturing age. Fact is, instead of being liberated from work we figure out more and more things to do with our free time and then create an economy to support those activities. What these robots are doing is helping to eliminate the middle class!
- We’ll continue to spend less and less time making things and more time servicing people. The greatest expansion of service will be in healthcare and technology utilization.
- Companies will be ever more transparent. Everything from leadership practices, hiring methodologies, performance management approaches, guiding values, financial numbers, you name it, will be readily available to the public. Even if you’re a private company.
- The amount of information/data we’ll face in only a few years is expected to more than quadruple. It is impossible for any one of us to keep up with the vast amount of information today, never mind the quadrupling of it. What will be important is identifying which information is most critical to your success and then finding out the best way to obtain that information. Think of it, for thousands of years, civilization had a very limited sources of information be it word of mouth, stone tablets, or daily newspapers. Only 50 years ago we had twenty a.m. radio stations, three TV stations, and a handful of papers to learn from. Now the information is limitless and, like the universe, tends to expand on itself.
- Most of the growth economy will be built around the edges making an already good human existence that much better. Of course there will be poverty, simply because of circumstances or how people choose to think about themselves. There will be two classes of workers, those who produce, manage, publish, analyze and apply information, and those people who service those people who do. There will be two social classes, the educated information class and the uneducated service class. Governments will be there to close the financial gap between the two requiring additional taxation on the haves. The last thing anyone wants is rioting in the streets.
- The workforce will continue to look different. As the 2012 election bore out, the country’s demographics are rapidly changing. Older, multi-racial, more women in power. Yesterday’s Mitt Romney image of the executive is changing in light of today’s realities.
These are some of the fundamental changes coming our way. The opportunity is to embrace and exploit these changes, and not react to or get run over by them.
Question of the Month
You can tell an employee that they can’t smoke on jobs, driving in your vehicles, at the office, etc. They can smoke on breaks and at lunch, if away from work or in a designated area. Here’s a good summary of the law in California.
Form of the Month
25 Benefits of Good Health (PDF) – This document lists a variety of benefits from maintaining a healthy lifestyle. We’d blow it up and place in the lunchroom so your employees see it every day!
Click here to listen to this month’s newsletter podcast.
REPRINT POLICY: Reprints are welcome! All you have to do is include the following notation with reprinted material:
©2013 Reprinted with permission from HRThatWorks.com, a powerful program designed to inspire great HR practices.
A recent Federal Court case State of Arizona v. ASARCO (9th Cir. 11-17484 10/24/13) points out just how bad supervisors can get and what can happen to an employer who looks the other way. Apparently the Plaintiff, Ms. Aguilar, got hit on by her bosses a lot. For example, in her lawsuit she claimed that on June 18, 2006, Aguilar became a rod and ball mill person, which took her from the filter plant to the main mill building. In Aguilar’s crew was Julio Esquivel, a “distributed control systems operator.” Although he was not her direct supervisor, Aguilar reported to him and he maintained some authority over her day-to-day work.
Before Aguilar even had started in her new position, Esquivel warned, “your ass is mine” and told her that he would be spending more time with her than his “lady.” According to Aguilar, Esquivel was often giving her conflicting orders, snapping his fingers at her, telling her to “watch herself,” yelling at her, and threatening her with termination. ASARCO responded to this testimony at trial by attempting to show that, as awful as Esquivel was toward Aguilar, it was not motivated by her sex but instead by his general boorishness.
As a result of Esquivel’s reputation as a “rude bully” who “yelled at everybody,” at least one manager at ASARCO did not feel the need to act in response to Aguilar’s complaints. In July, Aguilar asked for a leave of absence to deal with personal problems relating to the custody of her children. She took that leave in September of 2006 and did not return until November 1st. When she returned, she was placed on a different crew. Aguilar worked four more days and then quit ASARCO for good.
The jury found ASARCO liable on the sexual harassment claims but not on the constructive discharge or retaliation claims. Critically, the jury did not find any compensatory damages for Aguilar, instead awarding her one dollar in nominal damages for the sexual harassment claim. The jury then awarded her $868,750 in punitive damages!
Fortunately for the company, that verdict was reduced on appeal. Unfortunately, ASARCO and/or their EPLI carrier (if they had one) will have to dish out at least $125,000 plus in damages and easily over $150,000 in legal fees, if not twice that amount.
Moral to the story: Don’t let jerks, bullies, and other miscreants work for you!
In the recent case of Moradi v. Marsh, a Los Angeles Superior Court Judge ruled that an employer was responsible for an auto accident committed by an employee while running a personal errand on the way home from work. Normally an employer is not liable for accidents that occur when coming or going to work. The court’s synopsis was thus:
An employee of an insurance broker was required each workday to drive to and from the office in her personal vehicle. During the workday, the employee had to use her vehicle to visit prospective clients, make presentations, provide educational seminars, follow leads, and transport company materials and coemployees to work-related destinations.
On April 15, 2010, the employee left the office at the end of the workday and began driving in the direction of her home. She had decided that, on the way, she would stop for some frozen yogurt and take a yoga class. As the employee made a left turn at the yogurt shop, she collided with a motorcyclist.
The motorcyclist filed this action against the employee and her employer. The trial court granted the employer’s motion for summary judgment on the ground that the employee was not acting within the scope of her employment when she was making a left turn to get to the frozen yogurt shop. The motorcyclist appealed.
We reverse. Because the employer required the employee to use her personal vehicle to travel to and from the office and make other work-related trips during the day, the employee was acting within the scope of her employment when she was commuting to and from work. The planned stops for frozen yogurt and a yoga class on the way home did not change the incidental benefit to the employer of having the employee use her personal vehicle to travel to and from the office and other destinations. On the day of the accident, the employee had used her vehicle to transport herself and some co-employees to an employer-sponsored program, and the employee had planned to use her vehicle the next day to drive to a prospective client’s place of business. Nor did the planned stops constitute an unforeseeable, substantial departure from the employee’s commute. Rather, they were a foreseeable, minor deviation. Finally, the planned stops were not so unusual or startling that it would be unfair to include the resulting loss among the other costs of the employer’s business. Thus, under the “required vehicle” exception to the “going and coming” rule, the employee was acting within the scope of her employment at the time of the accident, and the doctrine of respondeat superior applies. Accordingly, the trial court erred in granting the employer’s summary judgment motion.
I know most employers would be surprised to learn that they have such an exposure. One more reason to make sure your insurance act is together. Remember, primary insurance is always with the vehicle owner. Secondary insurance is with the employer. Read your business policies carefully to understand your coverages and responsibilities. Here are some of the elements present where an employer has such liability:
- The vehicle is required to do the job.
- Use of the vehicle provides at least some incidental benefit to the employer.
- The employee will frequently use the car for office errands or to drive directly to a customer location.
- The employee was involved in a foreseeable minor deviation from her route going home.
Note that this exposure exists for workers comp and liability cases but not for wage and hour purposes.
In the most recent newsletter we discussed the challenges of working with alcoholics. A case out of California brings home why this is such a risky liability exposure. In the case of Purton v. Marriott a bartender, who was drinking at a company holiday party, drove home drunk and then decided to come back to the party to drive another drunk employee home. It was on that trip that he rear-ended Dr. Purton at approximately 100 MPH, killing him. He pleaded guilty to gross vehicular manslaughter while under the influence of alcohol and received a six-year prison sentence. To keep the story short, the court ruled that the bartender’s actions where attributable to the employer as a foreseeable cause of allowing him to be intoxicated and drive. There are some courts that rule the harm itself had to take place while acting in the course and scope of employment. In California, Washington and other more “liberal” states the rule is that only the alcohol consumption had to occur during work hours.
Bottom line: Don’t let your employees drink and drive in any jurisdiction.
According to a Department of Health and Human Services investigation, AHP committed the following errors:
- AHP impermissibly disclosed the EPHI of up to 344,579 individuals when it failed to properly erase photocopier hard drives prior to sending the photocopiers to a leasing company.
- AHP failed to assess and identify the potential security risks and vulnerabilities of EPHI stored in the photocopier hard drives.
- AHP failed to implement its policies for the disposal of EPHI with respect to the aforementioned photocopier hard drives.
Without admitting any fault they agreed to pay a handsome penalty. To see the Resolution Agreement click here.
Bottom line: Good risk management practices considers a wide range of exposures and risk that can be created by surrounding technologies (i.e. copiers, internet, social media, storage, disposal) and based on various information sources (financial or health information, trade secrets, R&D, etc.).
In the May 2013 case of Heyen v. Safeway decided out of Los Angeles, the appellate court affirmed a ruling that poses a large risk exposure for retailers of all kinds. Bottom line is that if a manager spends more than 50% of their time doing non-exempt work, they are non-exempt….even if they have significant managerial responsibilities. Safeway pointed out the reality of multi-tasking at these jobs but the court wasn’t buying it. “In order to count as exempt work, the employee must ‘clearly’ disengage from the non-exempt activity and engage in the exempt activity.” At issue were the jury instructions which the court upheld. The instructions told the jurors the following:
“Exempt” tasks include:
- Forecasting of store sales.
- Scheduling the work of store employees.
- Monitoring store sales and adjusting schedules to ensure compliance with payroll budgeting
- Directing the work of store employees.
- Inspecting store conditions.
- Inspecting and reviewing the work of store employees.
- Activities, such as audits and pulls, authorizing overrides, and providing for the safety of the employees and property.
- Training employees.
- Coaching store employees.
- Counseling, disciplining and firing store employees.
- Interviewing and hiring employees, including time spent instructing and supervising others in the process of selecting job candidates.
- Preparation and review of management paperwork such as: 259 reports, and profit and loss reports.
- Review and sort email and conventional mail and determine follow up action needed.
- Review of store employees‟ time and attendance records, including identification and completion of paperwork for edits needed to ensure accuracy of such records.
- Monitoring store conditions and delegating tasks to employees to meet federal, state and local laws and regulations regarding licensing, food safety, worker and customer safety, and consumer protection law (for example, food recall, weights and measures requirements).
- Handling employee complaints and grievances.
“Non-Exempt” Tasks include:
- Ringing up sales for customers.
- Bagging groceries and/or assistance to customers with carry out.
- Assisting customers with routine matters (for example, finding an item in the store).
- Stocking or facing merchandise, including items in the general merchandise, health and beauty aids aisle(s).
- Mopping and sweeping floors.
- Retrieving shopping carts from parking lot.
- Constructing merchandise displays.
- Selling money orders and lottery tickets.
- Stocking and replenishing stock on shelves, including out-of-stocks.
- Fetching items for customers.
- Unloading trucks and unpacking merchandise.
- Stocking beverage and other coolers.
- Labeling shelves, completing signage including shelf and price tags.
- Driving motorized pallet movers.
- Gathering shopping carts.
- Maintaining the back room.
- Putting up and taking down product displays and decorations.
- Preparing payroll.
They then had the jury determine the apportionment of time. In its opinion the court reminded employers in a footnote as follows:
California’s distinct approach to defining overtime exemptions “can also be illustrated in its treatment of the exemption for administrative, executive, and professional employees. … With regard to such employees, “[t]he federal exemption for this category of employees adopts a core test which focuses on the employee’s “primary duty”; if the “primary duty” test is met, then he or she is deemed exempt regardless of how much time the individual actually spends performing the primary duty. ….By contrast, the state law exemption, as in the case of “outside salespersons,” adopts the requirement that the employee must be “engaged primarily” in exempt work … the term “primarily‟ is defined as “more than one – half the employee’s work time.”
Conclusion: Employers won’t be able to get around the broad, pro-employee ruling in this case. I expect it will generate a flood of new claims along these same lines. It’s getting to the point where I advise California employers to simply treat these employees as non-exempt and figure out what you would need to pay them straight time to keep their total compensation, including overtime, the same as their salary.
In a recent Webinar I did with DFEH head Phyllis Cheng she shared this graph of claims filed in California in 2011. And it got me to thinking. It made me want to ask… just how bad is that?
There are roughly 16 million workers in California. In 2011 roughly 18,000 cases were filed with the DFEH (the new 2012 numbers will be closer to 21,000 but as of this writing were not published yet). Let’s assume that is one half the claims universe since claims like overtime, wrongful termination and the like don’t need to involve the DFEH. So… 16,000,000 divided by 42,000 gets you one claim per year, of some kind, per 380 employees. Many of the DFEH and other claims are dismissed as without merit. The really good cases get pulled out of the DFEH system and dragged into court. Employees win more than half the cases that go to trial with the average jury verdict hovering around $250,000, the average settlement around $75,000. And that doesn’t include attorney’s fees. Of course you can–and should–insure against these claims so that your exposure does not exceed your deductible limit of, say, $25,000. The cost of that insurance is approximately $150 per year per employee, which comes out to a $57,000 annual premium. Keeping on one poor manager you are afraid to fire due to a potential lawsuit will more than eat up that premium cost.
Note: The EEOC claims some 100,000 discrimination claims were filed with it in 2012.
While getting the stats for work comp claims was more difficult, what I could find indicated there roughly 780,000 workers’ compensation claims filed each year in California. Most claims (around two-thirds) are for medical care only, with no cash indemnity payments. Approximately 20 percent of claims are for temporary disabilities. Permanent partial disability claims account for about 14 percent of total claims – 10 percent are minor disabilities and four percent are major disabilities. Death benefits and permanent total disability benefits each account for about one-half of one percent of total workers’ compensation claims. According to the rating bureau, the average lost work claim cost roughly $68,000 (and there were roughly 260,000 of them.) Of course these claims are always insured and in 2010, employers paid an average of $2.37 per $100 of payroll for policies.
Bottom line with risk management is to analyze, mitigate, and insure against it where possible.
“The health of your employees has little to do with your health insurance costs – and the cost of health care has little to do with the health of your employees.” –Dr. Wendy Lynch
This issue discusses:
- Editor’s Column: How Many Bad Jokes Does It Take to Get You Fired?
- Summer Interns: To Pay or Not To Pay?
- Safety Bonus Programs: Pros and Cons
- ADA and FMLA: Symbiotic Interaction
- Employment Practices Risks: Reality Check
- Toys ‘R’ Us Sued For Alleged Discrimination Against Deaf Job Applicant
We have also provided you with the Form of the Month.
Please click here to view the newsletter in PDF.
Editor’s Column: How Many Bad Jokes Does It Take to Get You Fired?
I recently reported on a California case in which a manager was fired partly because he and his buddies would tell off-color jokes after work in one guy’s office, out of the earshot of others. A female attorney who was investigating a claim brought by a poorly performing employee felt that such conduct violated the company’s sexual harassment policies, even though it had nothing to do with the claim being filed.
I say, only in America!
I realize that many people today are hypersensitive to finding their rights violated. The complaining employee in this case seemed to be such a person. If, for some reason, someone feels ostracized by society or the demographics of the company where they work, they will constantly be filtering events to show that others are discriminatory and insensitive. Of course, at the family picnic next week, this “offended” employee will be laughing when their uncle tells the same jokes they found so offensive in the workplace.
Today’s workplace has changed. Mad Men is a period piece. Whether you like the great cleansing of the American workplace or not, it’s reality. So, if you want to give an employer an excuse to fire you, tell some off-color jokes on the job – or you might realize that’s probably not worth it and tell them outside the workplace. Things have gotten to the point that Prairie Home Companion jokes can be deemed offensive when uttered in the workplace. Are we so stressed that we’ve lost all sense of humor?
I’ll leave you with a safe joke my 11-year old told me that you can share in all sorts of company: “What did the green grape say to the purple grape?” Answer: “You gotta breathe, man!” As I see it, there are too many hyper-sensitive folks in the workplace that could do some breathing as well.
Summer Interns: To Pay or Not To Pay?
Now that summer season is here, it’s time to review your payment obligations to interns.
The DOL’s Test for Interns and Trainees
Although the Fair Labor Standards Act (FLSA) doesn’t define intern or provide an exemption from minimum wages or overtime for interns, it recognizes that not everyone who performs duties for an employer is an “employee,” and thus entitled to compensation under the wage and hour laws. Generally, the FLSA provides that if a company benefits from using interns, it must pay them at least minimum wage. However if the intern isn’t doing anything that directly benefits your company but is just observing or learning, you might be justified in not paying him or her.
Whether student interns are considered employees under the FLSA depends on the circumstances surrounding their duties and activities. The U.S. Department of Labor (DOL) uses a six-part test to distinguish interns or “trainees,” from employees:
- The training, even though it includes actual operation of the employer’s facilities, is similar to what would be offered in a vocational school.
- The primary benefit of the training is for the intern.
- The trainees don’t displace regular employees, but work under close observation.
- The employer derives no immediate advantage from the activities of the interns, which on occasion might actually be counterproductive.
- The intern is not guaranteed a permanent job at the end of the program.
- Both parties understand that the intern is not entitled to wages for the time spent in the internship.
Who Benefits: Intern Or Company?
Although courts will use these factors to analyze a worker’s status, they don’t necessarily weigh all of them equally. In fact, judges will often find that the most important criterion for determining whether someone is subject to the FLSA involves which party enjoys the primary benefit from the internship.
Essentially, if the intern benefits primarily from the arrangement, she will be considered a volunteer, rather than a paid employee. However, if the company is the primary beneficiary of the intern’s work experience, this person will be considered an employee who must be paid at least the minimum wage.
In one case involving a company’s use of trainees, McLaughlin v. Ensley, the Fourth U.S. Circuit Court of Appeals held that the owner of a snack foods distribution business had to pay trainees for route jobs. Before being formally hired for such a job, trainees were required to participate in what was usually five days of exposure to the tasks they would be expected to perform. They traveled an ordinary route with an experienced route man, loaded and unloaded the delivery truck, received instruction on how to drive the truck, restocked stores with the employer’s product, were introduced to retailers, learned basic maintenance on snack food vending machines and occasionally helped prepare orders of goods with financial exchanges. However, the employer did not pay the trainees during their training week.
In determining whether this practice was legal, the Fourth Circuit explained that the key question involved whether the employer or the trainees received the principal benefit from the orientation. The court held that the employer enjoyed a greater advantage than the trainees because they were, in fact helping the company distribute snack foods. The skills they learned in training were either so specific to the job or so general that they had practically no transferable usefulness. As a result, the appeals court ruled that the trainees who participated in the orientation program were entitled to receive minimum wages.
Ensuring FLSA Compliance
If you offer unpaid internships, structure the position so that the intern is the one who will receive the primary benefit of the work experience. Unpaid internships should concentrate on exposing the intern to a particular career field and offer a mentoring experience. The focus should not be on production – do not use interns as a free source of labor!
Also, if you use unpaid interns, document the nature of the relationship, explain that both parties intend the arrangement to be an unpaid internship that will provide the intern with practical learning experience. The intern’s actual duties should comply with the terms set forth in this s written documentation.
The Bottom Line
Having interns can be a great experience, not only for the intern but also for your company. Interns can bring a fresh perspective to your business and allow you to assess potential employees. Employees often get their proverbial foot in the door by starting as summer interns while in school and then becoming full-time workers after graduation.
Safety Bonus Programs: Pros and Cons
I recently received this hotline inquiry:
Q: We have a safety bonus program that gives a $25 gift card each quarter for all groups that have no lost-time accidents and at the end of the calendar year provides them with a share in an $8,000 bonus check. In researching this, I found that OSHA has stated that safety bonus programs which give monetary rewards to employees for no-lost time accidents can be seen as creating incentives to not report accidents or to pressure fellow employees not to do so. However, I read in a SHRM article that the Secretary of Labor stated that there would not be a fine for keeping such programs. Should we stop our incentive program it or leave it as is and wait for the DOL to prohibit it?
A: We’ve seen this memo from OSHA on HR That Works. Incentives always have their shadow side. If management makes it clear they want injuries reported, the next step is to approach your employees and ask how the company can use these incentives in a way that does not encourage non-reporting? They might well have some better ideas than what you’re using. There’s no law prohibiting safety incentives – just concerns about possible negative results from using them.
ADA and FMLA: Symbiotic Interaction
These case summaries, courtesy of Worklaw® Network firm Shawe Rosenthal, spotlight the symbiotic interaction between these two leave laws.
A federal court in Alabama held that an employer had no duty under the Family and Medical Leave Act (FMLA) to restore the employee to her job with an accommodation under the Americans with Disabilities Act (ADA). In Brown v. Montgomery Surgical Center, the employee who sought to return to work after FMLA leave provided a doctor’s note with lifting and standing restrictions. The employer refused to reinstate her without a full release. She then sued under the FMLA and ADA. The employee’s ADA claims were dismissed as untimely filed. With regard to her FMLA claims, the Court observed that the right to reinstatement under the act is not absolute, and held that an employee who is unable to perform an essential job function is not entitled to reinstatement. The FMLA does not require an employer to provide a reasonable accommodation that will enable the employee to return to work at the end of FMLA leave. The reasonable accommodation obligation arises from the ADA, not the FMLA.
More on the ADA and FMLA
In another case exploring the interaction between the ADA and the FMLA, a federal court in Pennsylvania held that an employee was not entitled to reinstatement under the FMLA to a pre-leave position that the company had given her as an accommodation for a temporary disability under the ADA and to provide better accommodation of her need for intermittent leave under the FMLA. In Karaffa v. Montgomery Township, a pregnant employee who was usually assigned rotating morning, evening, and overnight shifts was reassigned to morning shifts only as an accommodation for her gestational diabetes. Following her FMLA leave, the employee sought to return to the morning shift assignment. The court noted that she had been assigned the shift in connection with her need for intermittent FMLA, and thus it was not a position that she held “when leave commenced.” Moreover, under the ADA, this morning shift assignment was an accommodation for her temporary disability of gestational diabetes, which no longer existed after the birth of her child. Thus, both laws required the employer only to reinstate her to the original rotating shift assignment.
Employment Practices Risks: Reality Check
I just finished listening to an interesting podcast by the Freakonomics authors about the risks that gun use presents. For example, they indicated that the odds of a gun causing a person’s death are about 1 in 10,000, while the chances of a backyard swimming pool causing a death are some 100 times greater. Does this mean that we should focus on swimming pool control and forget about gun violence? Although I doubt that anyone would suggest this, it does give food for thought.
For the past dozen years, I’ve been in a catbird seat observing the incident of employment practices liability exposures and lawsuits. My conclusion: Employment Practices Liability Insurance cannot cover the major personnel practice exposures facing businesses. For example, there’s no risk mitigation for making poor hires, fostering low productivity, triggering high turnover, or failing to have workers play like a team. The frequency of such exposures, and their expense, far exceed those associated with employee lawsuits.
Let me share another statistic. In 2012 the U.S. had one of the worst years ever for mass shootings, with approximately 700 fatalities (four times the annual average toll). As you might expect, these sensational and painful cases grabbed plenty of headlines. However, in the same year, roughly 20,000 Americans committed suicide using guns, killing some 11,000 other people in the process – and garnering little, if any, media attention.
The same thing holds true for workplace risk exposures. How many articles are you going to read about the impact of bad hires or productivity left on the table every day? Where’s the drama in that? However, a juicy lawsuit in which a sexual harassment claimant gets a multi-million dollar verdict will get plenty of press.
Likewise, more than half of the discussions at any HR conference will involve compliance exposures. Meanwhile, the greatest risk to your company’s survival has little or nothing to do with compliance litigation. In my 30 years as an attorney, I’ve seen only a handful of small businesses go under because of employee lawsuits – and hundreds of companies of all sizes go out of business because of poor management practices.
As with the gun/swimming pool example, we need to understand the relative probabilities of the various risks employers face.
None of us need the horror of mass shootings or nasty employee lawsuits. These events make for good press (as they say, “if it bleeds, it leads.”) When we run 75 mph as a society, it’s hard for us to connect without doing so through a mass pity party. The media taps into this social reality on a daily basis with sensational headlines and lead stories, making it all too easy to divert business owners and managers from focusing on significant employment risk management issues.
Food for thought…
Toys ‘R’ Us Sued For Alleged Discrimination Against Deaf Job Applicant
The U.S. Equal Employment Opportunity Commission has sued Toys “R” Us, Inc. for alleged disability discrimination under the Americans with Disabilities Act. A deaf woman applied for a job at the toy retailer’s store in Columbia, MD. She was denied a sign language interpreter for her interview and the store refused to hire her despite her qualifications and ability to do the job, with or without a reasonable accommodation. I asked JAN expert Linda Batiste some questions about this case:
- Is the implication that it’s reasonable for a company to hire an interpreter any time a job applicant needs it?The implication is that under the ADA providing an interpreter is a reasonable accommodation which a company must consider on a case-by-case basis. The ultimate goal is effective communication during the job interview, and in some cases this means an interpreter, if no undue hardship is involved.
The problem that Toys “R” Us ran into was flat out refusing to provide an interpreter for the job interview without offering an alternative method of communication. Instead, the applicant was instructed to provide her own accommodation. I saw no indication that Toy “R” Us claimed undue hardship.
- What if a company interviews 10 people for a low wage job and hires only one. What if two of the applicants are deaf? Do they need to provide one for each candidate?
In some cases, an employer might have to consider hiring an interpreter for each applicant who is deaf. The Toys “R” Us case involved a group interview, and perhaps in such a situation only one interpreter would be needed. However, whether it’s one or multiple interpreters, most job interviews don’t last more than an hour, so the actual expense might not be that much, especially for a large company.
- If hired, what would be the company’s obligation to provide an interpreter then? That interpreter could cost more per hour than the employee.
If hired, the employer would have to assess the need for an interpreter on a case-by-case basis. For some jobs it might be minimal; others it might be more extensive. Again, the key would be effective communication; and, for some jobs, that can be done in other ways besides an interpreter. Under the ADA, employers should probably not try to make the argument that an interpreter would get paid more an hour than the deaf applicant. This isn’t generally accepted as meeting the undue hardship defense.
My take: Nothing drives employers nuts more than the ADA’s “case-by -case” analysis. Although larger companies might absorb such expenses readily, it could be an undue burden on smaller firms. The best answer is to get professional advice in such circumstances.
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We recently hosted a webinar with Rick Betterley of the Betterley Report. Rick is the foremost expert on Employment Practices Liability Insurance (EPLI) coverage. Here are some of the notes from our webinar with him as well as from the Betterley Report. To learn more about the Betterley Report, go to Betterley.com.
To begin with, there has been an increase in rates as well as in retentions (the deductible an employer has to pay). While there hasn’t been much change in coverage, underwriters are raising rates anywhere from 10-25%. The EPLI industry is a $1.6 billion business. According to Rick, underwriters are not very excited about insuring employee leasing and temporary staffing companies, educational and religious entities, public entities, law firms, investment banks, and the entertainment industries. Also considered undesirable employers are extended care (nursing home) facilities, real estate/property management companies, auto dealers, and technology companies. What this tells me is that all of the above mentioned entities could greatly benefit from using HR That Works!
One of the greatest concerns is the ability of an employer to select the counsel they would like to use should they get sued. Of course the insurance agencies would like to make their lives simple and work solely with one of the nationwide law firms and not with your local counsel. However, if they are qualified, chances are that during negotiation you can name those local attorneys as your panel counsel. As you can well imagine, we highly recommend you use one of the Worklaw® Network firms that helps support the HR That Works program.
One of the greatest concerns in terms of exposure are class action wage and hour claims. Most insurance companies have been very reluctant to underwrite these claims except for the cost of defense. They will not underwrite indemnification (payment of the underlying wage claim) because they feel that is greatly within an employer’s control (why bother paying for overtime when you can simply have the insurance company do so for you if ever get sued). In April, Aon announced a wage and hour coverage for large employers. Unfortunately, this coverage is not available yet for small employers, but perhaps Aon has kicked off a trend.
As Rick reminds us, most larger employers have EPLI coverage; however, for most HR That Works sized employers it’s more like a 50/50 proposition. Our advice is this: Don’t go bare and negotiate for some EPLI coverage and, if necessary, with a high retention rate.
According to the 2012-2013 Edition of Jury Award Trends and Statistics, now published by Westlaw, the median award of employment practice claim in 2011 was $325,000, up from $172,500 in 2010. The median award rose from $489,951 to $528,957. The amount of claims in the $250,000 to $1 million range rose from 34% to 56%. The award median for age cases was $247,800; disability $292,500; race $215,652; and sex $150,000. As a separate category, retaliation awards had an award median of $208,275 with an award mean of $741,971.
Consistent with past years, state verdicts are generally higher than federal court verdicts, averaging more than 1.5 times the average federal court verdict award.
The probability of the plaintiff winning a case at trial hovers at 51%. Age cases 40%, disability discrimination 44%, race 50%, and sex 64%.
Even the settlements of getting more expensive. The average employment practices settlement median was $100,000 with a settlement mean being $178,063.
Statistically, a company with 100 employees can expect to get hit with an employment practices claim once in every three years. All the above is plenty of reason to make sure you have your compliance act together and purchase employment practices liability insurance. To order your copy of the report, go to http://store.westlaw.com/employment-practice-liability-jury-award-trends-statistics-2012/186040/30089008/productdetail.
Join us Wednesday, January 23, at 2PM EST for the EPLI Trends: An Update from Betterley’s EPLI Market Survey 2012 Webinar presented by EPLI expert, Rick Betterley.