“You’re off to great places, today is the day: Your mountain is waiting, so get on your way!” –Dr. Seuss

This issue discusses:

• Editor’s Column: 10 Personnel Management Challenges for CEOs
• Make Sure Volunteer Workers Carry Workers Comp
• EEOC Credit Report Lawsuit Dismissed
• 2012 EEOC Claims Near 100,000 Mark
• An Employee Referral System That Works

We have also provided you with the Form of the Month.

Please click here to view the newsletter in PDF.

Editor’s Column: 10 Personnel Management Challenges for CEOs

Over the years, I’ve had the chance to do hundreds of three-hour workshops for CEOs about personnel practices. In light of this experience, I’d like to share 10 challenges that CEOs and executives face when it comes to personnel management.

1. The difficulty in finding new talent. The good news is that most of these employers expect to do more hiring than firing this year. The challenge is that most of the good employees are already taken. Perhaps the biggest mistake is thinking that you find these people, as opposed to attracting them. To attract talent, you have to position yourself as an employer of choice – a great place to work. Companies such as Costco, Southwest Airlines, and my beloved In-N-Out Burger do this so well that they don’t need to go find anybody.
2. Problems in retaining top talent. This is the flipside of the conversation above. In the marketplace of talent swapping, some companies will win, while others lose. To what degree do you have a philosophy, strategies, and tools to make sure you are retaining top talent? Do you understand why people either come to work for you (through a post-hire survey) or why they leave you (an exit interview)? Do you tap into their opinions and concerns with surveys, focus groups, and one-on-one conversations? Remember: Turnover is contagious.
3. Lack of managerial leadership. When we run 75 miles an hour and promote people into management, chances are that this happens with little or no training. Fact is, half of managers in your industry are above average and half are below average. Guess who gets more training? You need to train managers in business acumen, communication, basic compliance, team building, and systems understanding. Most important, they need training in time management so that they can spend 80% of their time adding the value they can – and only 20% doing administrative tasks.
4. Low employee engagement. This is easy to understand when we’ve just gone through a difficult recession, which has limited raises, cut benefits, and stunted growth opportunities. On top of that, it feels that we have a federal government that fosters an us versus them mentality with the workforce. Perhaps the question for leadership is “how can we help our employees?” How can we help them become more productive so they can grow in their careers? How can we help them find greater meaning in the work they do every day? How can we help them gain more control over the direction of their career? As Shakespeare stated so eloquently, “To work we love with delight we go.” What would it take for your employees to love the work they do every day?
5. Failure of management to benchmark or improve performance. Performance management is one of my favorite subjects. To begin with, do you have a specific goal for improving performance? Sure, you want sales to increase by 10%, but do customer service reps, the receptionist, and the CEO have a goal to increase their specific performance by 10%? The next question is: What are you trying to improve? What aspect of performance is most important? If you have a high growth company, perhaps what matters most is quick hiring, onboarding, and training performance. If you’re a restaurant, perhaps your food is great but your wait staff is abysmal. Focus on your strategic objective.
   Here’s a question I encourage everyone to ask those who report to them and, if you’re the one doing the reporting, to ask yourself: “What are the three most important things this employee does every day?” What good is a performance management approach if you can’t be on the same page as this question? When you have determined this, ask: “How would you know if you were doing your job well without having to ask me or without my having to tell you?” Once the employee can answer this question to your mutual satisfaction, you have legitimate benchmarks. The question then becomes: How can you improve? What training, resources, support, etc. do you need to supply this employee so they can perform at their best? Remember, as both Peter Drucker and Dr. Deming said: Nine out of ten employees want to do a good job every day; it’s the system they find themselves in that creates problems.
6. Misaligned compensation, benefits, and incentives. Here’s another of my favorite subjects. Exactly why do you have healthcare, 401(k) or other benefits? Do they help you to hire better talent? If so, how would you know? Do benefits help you retain talent and improve performance? How would you know? If these benefits don’t tie into your strategic objectives, the chances are that you’re wasting many of them – and at a hefty price tag. I’ve begun working with a genius who is turning the benefits sales process on its head. By running algorithms of employee data and healthcare expenses, he can define the optimum benefit mix for an employer, which it then takes to the marketplace – as opposed to the marketplace telling the employer what plans are available for their demographics. Finally, how benefits are managed can impact productivity. For example, sick pay can actually grow healthcare expenses and reduce productivity. Not surprisingly, San Francisco and now Portland actually require employers to offer sick pay. How about providing wellness pay or paying people for being at work? Bear in mind that any incentive you use has both negative and positive consequences.
7. Failure to execute strategic initiatives. We live in a rapidly shifting business environment that requires us to manage change quickly and successfully. If you haven’t done so, please watch the recorded webinar I did on Change Management and have your entire management team do the same. (If you don’t have access to HR That Works, let me know and I’ll send you a link to it). The webinar makes two major points: First, one of the traps of the hero is over-commitment. This holds true of both individuals and the company as a whole. When we over-commit, we tend not to live up to our commitments – which generates mistrust. Secondly, strategic initiatives require buy-in. Just as in sales you want to make the purchase the buyer’s idea, when it comes to change management, you want it to be the idea of your supervisors and employees. Give them some ownership of the idea and you’ll find them onboard with it. Because change will remain a constant, we’ll need to keep, coaxing, encouraging, and inspiring each other towards growth. When we stop the over-commitment and focus on execution, we’ll keep growing the bottom line.
8. Finding time for management. Too many executives and managers mismanage their use of time so badly that they’re on overload and unable to take on any growth objectives. Most top CEOs I know take at least a few days a month away from the job so that they can work on the business instead of just working in the business. Google is smart enough to allow its employees to do this one day a week. As Stephen Covey reminded us in the Seven Habits of Successful People, you need to keep sharpening the sword. Everyone in your company needs to understand and execute time management techniques. I’ve produced an HR That Works Time Management Training Module that can help you and your managers with this.
9. Lack of commitment to or interest in human resources. I realize that many business owners and executives feel that HR is boring, or worse. They didn’t have to know anything about it to start a business. Even though they often have little or no idea on how to run an HR department or function, in one-on-one meetings with their peers in Vistage, executives usually describe personnel issues as the major challenge facing them. The fact that employee relations just isn’t their thing provides an incredible opportunity for HR professionals to offer the expertise needed.
10. Failure to understand the bottom line potential of HR. Business owners are revenue animals who often don’t see personnel practice as generating revenue. This has been a long-standing uphill battle for HR. There’s a reason why Fast Company magazine years ago published an article, “Why I Hate HR.” In reality, many companies have great HR practices which form the foundation of their bottom line success. For example Jack Welch stressed the importance of HR practices as an economic driver in his years at GE. In fact, he’s still talking about it.

If you own, run, manage, or advise a company, addressing these HR challenges provides a unique competitive advantage!

Make Sure Volunteer Workers Carry Workers Comp

The California case of Diane Minish v. Hanuman Fellowship carries a valuable lesson for anyone involved with nonprofit organizations.

After Diane Minish, a volunteer worker with the nonprofit Hanuman Fellowship was accidentally thrown from a forklift, she sued the organization for negligence. Hanuman argued the exclusivity of Workers Compensation as a remedy, claiming that its Comp policy covered the plaintiff. Although Minish did receive comp benefits, she felt they were too low – and so she sued for more. As in many states, under California law, “private, nonprofit organizations are not required to provide [Workers Compensation] coverage for volunteers (see §§ 3700 [requiring coverage for employees]; 3352, subd. (i) [volunteers are not employees]), section 3363.6 allows them to do so if they choose.” Although the statute is awkward and disjointed, it provides, in essence, that a volunteer becomes a covered employee if the board [of the nonprofit] so declares in writing before any work-related injury.

Minish argued that she had not agreed to this arrangement:

“Plaintiff contends that under section 3363.6, a declaration rendering volunteers covered employees does not become effective unless and until an affected volunteer has notice of the declaration and voluntarily accepts Workers Compensation coverage before any injury. Thus, because the undisputed evidence establishes that she did not receive such notice and did not voluntarily accept Workers Compensation coverage before the accident, the Act was inapplicable. “

The court disagreed, ruling that

“Here, of course, without the slightest advance warning, Hanuman plunged Minish into the toils of the Workers Compensation system not only without her knowledge, but – as soon as she learned of it – very much against her will. Section 3363.6 does not explicitly require notice to volunteers that they have been deemed volunteer/employees. Nor does the statute provide that such status must be accepted by each volunteer individually…. In short, we reject the plaintiff’s claim that section 3363.6 imposes a notice and acceptance requirement.”

However, the court dismissed the argument that Minish was “estopped” from denying the exclusivity because of the fact that she used the Workers Comp system. So, although the suit will go back to court, chances are that she will lose in her attempt to claim negligence.

The bottom line: Whether you sit on a non-profit board, run a non-profit, or advise one, make sure you do what’s required under state law to make sure that your volunteers: a) sign liability waivers and b) get Workers Comp coverage. Doing so will help avoid an ultra-expensive negligence claim. Also, make sure that your insurance coverage addresses such claims where the doctrine of workers comp exclusivity does not apply.

EEOC Credit Report Lawsuit Dismissed

The EEOC received plenty of publicity from its 2010 lawsuit against Kaplan Higher Education (EEOC v. Kaplan Higher Educ. Corp., N.D. Ohio), alleging that the company’s use of credit reports as a factor in hiring decisions for financial aid positions had a discriminatory impact based on race and, thus violated Title VII of the 1964 Civil Rights Act. A federal district court dismissed the EEOC suit on January 28, 2013.

Kaplan did not track the race of its applicants, and was not required to do so. To show a discriminatory impact based on race, the EEOC hired expert “raters” to determine the race of applicants by pictures and other information, and thus evaluate whether Kaplan’s practice had a discriminatory impact. In dismissing the case, the court held that the commission failed “to present sufficient evidence that use of ‘race raters’ is reliable.” The court also chastised the EEOC saying that, “It is clear that EEOC itself frowns on the very practice it seeks to rely on in this case and offers no evidence that visual means is accepted by the scientific community as a means of determining race.” The court concluded that because EEOC’s expert “relied on data obtained by unreliable means … whether the jury could ultimately ‘correct’ the process employed by the ‘race raters’ is irrelevant.”

The court ultimately dismissed the case because the EEOC did not provide sufficient evidence to make its case.

Don’t be surprised if the commission keeps pursuing claims that the use of tests, credit reports, and other background checks has a discriminatory impact on blacks, Hispanics, women, and others. The EEOC will simply look for another case and try to correct the evidentiary issue that resulted in the dismissal of its claims against Kaplan.

2012 EEOC Claims Near 100,000 Mark

The Equal Employment Opportunity Commission handled nearly 100,000 claims in 2012. According to the commission’s press release, “The U.S. Equal Employment Opportunity Commission (EEOC) …received 99,412 private sector workplace discrimination charges during fiscal year 2012, down slightly from the previous year. The year-end data also show that retaliation (37,836), race (33,512) and sex discrimination (30,356), which includes allegations of sexual harassment and pregnancy were, respectively, the most frequently filed charges. The fiscal year 2012 enforcement and litigation statistics, which include trend data, are available on the EEOC’s website.

The press release added that:

“In fiscal year 2012, the EEOC filed 122 lawsuits, including 86 individual suits, 26 multiple-victim suits (with fewer than 20 victims) and 10 systemic suits. The EEOC’s legal staff resolved 254 lawsuits for a total monetary recovery of $44.2 million. EEOC also continued its emphasis on eliminating systemic patterns of discrimination in the workplace. In fiscal year 2012, EEOC completed 240 systemic investigations which in part resulted in 46 settlements or conciliation agreements. These settlements, achieved without litigation, secured $36.2 million for the victims of unlawful discrimination”

What the EEOC didn’t mention is that it’s backing off a bit on its aggressive litigation stance due to a combination of tight budgets and mixed courtroom results. For example, as mentioned in the previous article, a federal district court recently dismissed the commission’s well-publicized credit background lawsuit.

I for one, hope the EEOC focuses more on education and conciliation, rather than litigation.

An Employee Referral System That Works

provide a valuable source of new workers, many employees are reluctant to provide referrals because they’re afraid that they’ll take the blame if the new hire doesn’t work out.

Here are a few ways to reduce this fear:

• Provide a worthwhile financial incentive for referrals. Money can do wonders to overcome the fear of embarrassment.
• Consider a mix of contests, raffles, etc. in addition to cash making referrals more fun and competitive.
• Think in terms of the new employee’s lifetime value. If a worker can earn the company $50,000 per year for an average of three years, how much would you be willing to invest to get this return? If you pay recruiters 10% to 30% of the new hire’s annual salary, does it make sense to pay an employee only 1 or 2% for a referral?
• Space out the referral bonus in quarterly payments, based on specific benchmarks. For example, you can give an initial payment for the referral, a second if the employee is hired, another one at six months, and the final one on the new hire’s anniversary date.
• Train employees on how to approach prospects and make it easy for them to tell the prospect your company story. Give them a pamphlet, some type of document, or a web page link that defines the business and the opportunity the position offers the prospect.
• Finally, measure the program’s results on a regular basis so that you can keep improving it.

Form of the Month

Workplace Violence Assessment Survey (PDF) – There’s no doubt that violence has raised its ugly head in the workplace. Here’s a form to help you assess the exposures at your company.

Podcast

Click here to 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.

Podcast: Play in new window | Download

In this short video, Don Phin goes over the The Bermuda Triangle of Employment for Human Resources Departments around the country.

Return to Work (RTW) and Stay at Work (SAW) programs are part of a business’ strategy to retain valued employees and to enhance the productivity of its workforce. “The goal of a return-to-work program, sometimes called a transitional duty program, is to make job changes or provide job accommodations that return individuals to work who are absent for workers’ compensation or disability-related reasons.”[1]

As with workplace accommodation programs, a RTW program should have clear written policies articulating each party’s responsibilities. Accurate job descriptions including the physical demands of particular essential functions should also be developed. This helps everyone in the process (e.g., doctors, rehabilitation staff, and accommodation specialists) understand the job requirements. A good understanding of the job demands and the employee’s limitations and abilities is the starting point for determining if effective job accommodations will enable the employee to return to or stay at work while still recovering from injury. Effective job accommodations insure that the employee returns to work as soon as possible without risk to the employee or employer.

Of the employers who called JAN for technical assistance, most (82%) were doing so to retain a current employee.[2] Thus, most of JAN’s publications contain accommodation solutions that could be generalized to a RTW or SAW situation. JAN also offers a number of examples specific to RTW.

For instance:

Situation – A warehouse employee was transitioning back to work with lifting restrictions after being injured by falling boxes of product.

Accommodation Solutions:

• Provide overhead structure for lifting devices;
• Place frequently used tools and supplies at or near waist height;
• Provide low task chairs, stand/lean stools, and anti-fatigue mats;
• Provide compact lifting devices to push and pull supplies and tools from storage;
• Make wheelchairs, scooters, industrial tricycles, or golf carts available; and
• Provide aerial lifts, rolling safety ladders, and work platforms.

The full publication, Fact Sheet Series: Job Accommodations for Return to Work is available for download. If you need additional guidance in identifying a device, or need information on where to buy the device, please call one of JAN’s Consultants.

Below are resources to learn more about developing your company’s RTW or SAW program:

• U.S. Department of Labor’s Office of Disability Employment Policy Return to Work Toolkit
• Disability Management Employer Coalition (DMEC)
• Return to Work Matters
• Society for Human Resource Management (SHRM) Disability Employment Resource Page (available to nonmembers and members alike)

- Louis E. Orslene, MPIA, MSW, Co-Director

 - Return to Work: A Snapshot (Part 2 of a Continuing Series, Read Part 1)

As more than 80% of inquiries to JAN involve retention of a current employee, the importance of contributing technical assistance to stay at work and return to work programs is vital. Both practices ensure valued employees are retained, productivity is maintained, and recruiting and on-boarding costs are saved. This is the second article in a series about these important practices in the workplace. The following article results from a collaboration between JAN and Return to Work Matters (RTW Matters). RTW Matters is a practical online resource for employers and disability professionals. Look for the Join Now link on the left hand side of the RTW Matters homepage.

He Ain’t Heavy…He’s My Employee

In the spring of the year in 2008, on a cold and dreary day, a freezing rain fell to coat everything it touched. Dan had just parked the CDL class truck and was stepping down to move on to his next task. What Dan didn’t know was that the next task would be a trip to the emergency room. When exiting the truck, Dan fell down and landed on his knee, causing a tear that eventually lead to a surgical repair. Two months later, Dan was told he could go back to work, but would have some temporary restrictions. Although his employer didn’t have anything he could do within his physical capacity, they would try and “come up with something.” For the next seven months, Dan remained at home and collected compensation pay at two-thirds his salary.

Although he made use of the time by attending physical therapy and follow-up doctor appointments, Dan was getting bored and a little worried about whether he would ever return to his job. Dan missed the gang at work and would frequently stop by for a chat and any news on possible light duty assignments. Finally, an opportunity came up for Dan to return to work, and even though it was limited to four hours a day of snow plowing, he happily accepted. Eventually, Dan was released to full duty and returned to his heavy equipment mechanic position, but to everyone’s dismay, Dan’s knee started to give him problems within just a few weeks. When the MRI showed another tear, a second surgical repair was performed and once again, Dan was out of a job.

In desperation, Dan scheduled an appointment to talk with the company’s return to work coordinator, who immediately contacted the ergonomic specialist to schedule a meeting for the two of them to meet with Dan and his supervisor to form a return to work strategy. A job analysis was completed, which determined that the physical ability to kneel and squat were essential to performing the heavy equipment job. Unfortunately, these were the very same physical demands that Dan was restricted from doing on what was now a permanent basis. This could have been the end of the story except that the people involved were a bunch of very determined and creative folks.

An ergonomic evaluation of the work area was completed and another meeting was held to discuss a plan. The only thing keeping Dan from returning to his job was his inability to maneuver and work on the equipment. So, was there another way of maneuvering? Well, research would need to be done and budgets would need to be considered. Dan was told that they would let him know when they had some answers. During what Dan would say were some of the longest days of his life, he stayed home, earned less money and worried about his future.

Then came the day when Dan got the call, asking for him to come in to work for a meeting. The news was good. A hydraulic lift had been indentified that could be used to lift the work product to waist height. This allowed Dan to avoid the kneeling, squatting, and heavy lifting he was restricted from doing, while still allowing him to perform all the duties of his heavy equipment mechanic job. This job modification not only returned Dan to his full time job, it came with an additional benefit; the ability for other workers to use the lift, thereby preventing additional work injuries.

From the efforts of Dan and his supervisor, the ergonomic specialist and return to work coordinator, long term disability was prevented. This not only saved the employer money and a loss of production time by bringing on a new employee, it made them feel good that they had a part in doing the right thing by a valued employee. The other employees recognized the efforts of their employer, which instilled confidence that if they ever met with similar circumstances, they would be taken care of. For Dan, the benefits were huge. He could now go back to being a productive member of society and earn the money he was previously earning. For the community, the benefits were limitless: the return of a member to gainful employment and the prevention of unemployment side effects such as anxiety and depression, that affect the individual and family members. This case had many factors that led to its success, but most important was the great team collaboration, established partnerships, and good communication between the employee, supervisor, RTW coordinator, and all the other team players involved in the case.

The cost of the hydraulic lift? $2,667. The return of a valued employee? Priceless.

For more on lifting devices, the costs and benefits of job accommodation, and effective accommodation practices, contact JAN.

- Article by: Mary Harris & Shelly Frohrip, Contributors, Return to Work Matters.

I recently joined a very lively conversation in the Work Comp Analysis Group on LinkedIn http://www.linkedin.com/groups?home=&gid=1328307&trk=anet_ug_hm&goback=%2Egmp_1328307

A few salient points were made:

1. Most claims are legit.
2. While it’s easy for folks to point fingers depending on their agenda, all sides impact the analysis. As an example, Paul Jahn contributed this insight:

“An interesting discussion on the perceived stigma of filing a workers’ compensation claim but all in all one that is focusing on outlier claims.

The system (in the US) typically does a pretty fair job of handling and resolving the vast majority of claims. At PERMA (where I am very familiar with the data), 75% of our claims resolve without loss of time and 80 to 90% of the lost time claims resolve with a return to work. Typically we have 10 to 15 long term litigious claims per accident year out of a universe of 3500 or so.

These claims all have to be looked at on an individual basis (and they all tend to be very high cost). I have been doing so for over 20 years and can draw some general conclusions.

1. Most claims that do not resolve in some sort of a return to work start out with a poor relationship between employer and employee.
2. Distrust between providers of coverage and injured workers can make placement in alternative employment a futile effort. An assumption of good faith on both sides could help everyone involved in the system.
3. A poor economy exacerbates systemic problem. Some employers place less value on injured workers when they can be easily replaced and in a tough job market placement in alternative employment is difficult.

As a system designed to temporarily tide injured workers over until they can return to their original employment, the system works pretty well. As a means of dealing with management issues and economic problems that complicate long term serious disability, the system is at best a band aid.”

I couldn’t agree more! Take a look at the Injury Prevention That Works Report.

This is a classic “trap” case. A guy gets injured and is claimed 100% disabled. He cannot go back to his regular job as a police officer…but…and it’s a $1.5 million but…he could be accommodated under the ADA to do a light duty position as an accommodation.

Here’s the paragraph that says it all:

“The more persuasive evidence suggested that Lindsay was more focused on the workers compensation administrator’s concern about re-employing Plaintiff than on any medical restrictions per se. Cambridge Associates—a third party workers compensation claims administrator recently hired by the City for its expertise in managing workers compensation cases—instigated the decision to send Plaintiff home because of its concern that the City could not place someone in the workplace who, for purposes of workers compensation, was “100% disabled.” There is a strong inference that Lindsay and others involved in the decision deferred to Cambridge’s presumed expertise, not realizing that having already placed Plaintiff into the “light duty” assignment, the City had an independent duty to comply with FEHA.”

In ruling it concluded:

“The court finds that the City is liable for disability discrimination based on adverse employment action. In May 2003, it maintained several permanent “light duty” assignments and filled the assignment with sworn officers whose disabilities prevented them from performing the otherwise essential functions of a sworn police officer. The City placed Plaintiff into one of these assignments. Although Plaintiff was able to perform the essential functions of this “light duty” assignment, Plaintiff’s supervisors decided to “send him home” after learning, from the City’s worker’s compensation administrator, that he was “100% disabled.” The City’s decision to send him home was an adverse employment action based on discriminatory criteria. At trial, the City failed to prove any legitimate nondiscriminatory basis for terminating his employment, and is therefore liable for discrimination.

“The court also finds that the City is liable for failure to engage in an interactive process or to otherwise accommodate Plaintiff’s disability. After years of workers compensation litigation, the City had extensive knowledge about Plaintiff’s past disabilities. The City’s decision to bring him back to work notwithstanding its pre-existing knowledge of his disabilities was sufficient to shift the burden of proof and require the City to demonstrate that it engaged in meaningful dialogue with Plaintiff and made reasonable accommodations. Instead of engaging in a dialogue, the City summarily instructed him to leave the workplace and is therefore liable.”

Employer Lesson: Remember, The ADA and often FMLA run concurrently with Work Comp return to work issues. The failure reasonably to accommodate a disability the question is whether the employee can perform the essential functions of the position to which reassignment is sought, rather than the essential functions of the existing position.

To read this instructional case go to http://www.courtinfo.ca.gov/opinions/documents/B224303.PDF

“Soon is not as good as now.” – Seth Godin, Poking the Box

This issue discusses:

• Editor’s Column: What’s Going on Out There and How it Affects Your Business
• Are Your Employees Worth What You’re Paying Them? Really?
• The Causes of Workers Compensation Retaliation Claims
• The Indirect Cost of Accidents and Lawsuits
• The “Going and Coming” Rule
• Failure to Communicate Ruins Employee’s FMLA Claim

We have also provided you with the Form of the Month

Please click here to view the newsletter in PDF.

Editor’s Column: What’s Going on Out There and How it Affects Your Business

Every week I read Time, Business Week, and The Economist, together with about a dozen other periodicals. I’d like to share a number of the main themes “going on out there” and how they might apply to running your business. Remember, what’s going on out there is a reflection of what’s going on “in here.”

1. Education equals wealth. All three magazines tend to piggyback stories from each other. All three have discussed recently how income disparities nationwide and worldwide are impacting society. Fact is, those with the greatest level of education also have the most amount of wealth. The U.S. remains a world leader in education. We have nine out of the world’s top 10 endowed universities and remain the primary source of global innovation. For example, Harvard faculty members have earned more Nobel prizes than either France or Russia.

According to one of the articles, the world’s standard for wealth remains at $1 million in the bank. Another article concluded that it takes approximately $70,000 per year to be happy (i.e., middle class).

How this applies to managing your business: The wealthiest companies will also be the most educated ones, with the most educated owners, managers, and employees. They will place a high value on constant training. Successful companies will give employees an opportunity to learn more so they can earn more.

2. Tiger moms, tiger bosses, and the tiger self. Battle Hymn of the Tiger Mother by Amy Chua, a book written by a controlling Asian-American parent, describes the strictness with which she raised her two daughters. It caused a lot of discussion online, in the media, and among my wife and her friends. Of course, the liberal reaction was that the parent was too harsh. By her own admission, this was sometimes true. However, look at the results. She has two highly talented, healthy, and well-behaved young adults who claim to have no regret with their mother’s tough parenting style. On the other hand, we have an entire generation of parents more interested in being their kid’s best friend than a parent. Many of these kids get to do whatever they want to do, including watching hours of TV, texting friends, or playing video games. These children are disconnected and will not be prepared to compete with the tiger children. Their only hope will be to be more innovative than their counterparts. Unfortunately, I don’t see how hours of TV or video games will help them to be more innovative.

Dan Kennedy reminds us that if we want to be rich, we shouldn’t do what the huddled masses do with their time – which includes watching TV, engaging in gossip, spending hours on social media, fantasy football, and anything to do with Kim Kardashian or Charlie Sheen. I believe that there will be a demarcation not just between the intelligent and the unintelligent, but also between the watchers and the doers.

How this applies to managing your business: Are you a tiger boss? Are you overly demanding of your employees? Do they appreciate or resent your strict ways? Do you have a tiger self? Are you tough on yourself? Are you unnecessarily tough on you? In my opinion, the workplace, like the home, requires a balancing act. I expect nothing but the best from myself and the people around me at work and home. Anything less than excellence is simply not acceptable. I understand the importance of discipline, planning, and process. I also understand that my employees need permission to think for themselves and not to be so afraid of punishment for making mistakes that they fail to push themselves to higher levels.

3. A continuing loss of faith in institutions. There’s a breakdown in confidence with our financial, educational, political, and business institutions. Politics and economics are transitory. Yesterday’s regime is not current enough to be trusted and today’s is not experienced enough to be trusted. As we lose faith in institutions, we’re gaining faith in communities. We trust those who are closest to us. Given the advent of social media, somebody can be very “close,” yet 6,000 miles away. On the other hand, you might connect with a political activist two blocks away from you that you’ve never met before.

How this applies to running your business: Business is an institution. Statistics have shown and common sense reveals that we’re less enamored with our institutions today than ever, whether it’s Congress, the local school board, GM, or your company. There’s less loyalty to business entities among consumers and employees than ever. Employees today trust in and are loyal to the communities that involve their work and personal activities. Today’s leader realizes that they have to foster those communities and motivate them toward profitable ends. You can entertain and talk with people all day long, but as the IBM commercial says, “How do you make money at this?” The answer is to build this community outside of your four walls with your clients, customers, and prospects. A recent book I read, Crush It, encourages us to talk about what we’re passionate about. Do your employees have permission to do this? This might be something as simple as an account manager talking about the passion she has for doing a great job for her clients every day.

4. Hard times for democracy. There’s been a decline in democratic governments. Certainly, imbalances in wealth could be one cause for this challenge. The age-old challenge of trying to get government to spread the wealth through capitalist and democratic means is falling prey to fear and greed. Even here at home, we’re losing faith in our democratic institutions, even as we continue to realize that they’re the least of all evils.

How this applies to your business: First, the workplace is not a democracy, even if it’s unionized; it’s a business. The challenge I see is that business owners in tough times who operate more out of fear than greed, can move toward an authoritative management style. This will produce short-term results at best and resentment and eventual overthrow at worst. Ask how you can be more “inclusive” of the thoughts and feelings of your workforce.

5. The Consumer Electronics Show. Listening to and reading about what went on in Las Vegas assures me that people are becoming increasingly detached from their natural environment. Whether it’s Apple TV, Wii games, or new tools for texting, it appears that the only way we’ll be connected in the future is through digital means. I saw a news video recently in which a woman, while texting to a friend at a mall, tripped over a knee-high wall and fell in to a water fountain in the middle of the mall. One of the employees released the video thinking it was hilarious, and it became a YouTube sensation. Of course, the woman expressed her outrage at this insensitive act and her lawyer had the guy fired! Amazing.

What this means for your business: First, it’s hard to fight today’s reality. Think Kung Fu. Go with the flow! We have to be willing to communicate through these tools as owners and employees. Sticking our head in the sand or playing dinosaur means going out of business. However, as John Naisbett warned more than 25 years ago, the more we go “high-tech,” the more we need “high-touch.” Today, the company that can go high touch will win not just people’s minds, but their hearts and wallets as well. Going high touch in a high-tech world is the single most powerful way to show you care.

6. Us versus Them. Where would the good ol’ plot be without “goodness triumphs over evil?” More than half of the content in these leading news magazines focuses on some type of conflict: Democrats vs. Republicans, North Sudan separating from South Sudan, Arabs vs. Jews, Libyan vs. Libyan, China vs. the world — and all of the violence, destruction, pain, and war that these conflicts create.

What this means for your business: No matter how hard you try to be a good boss, at some point you’ll need to deal with conflicts — employers vs. employees, like cats vs. dogs. As leaders, we need to acknowledge this fact, stand it on its head, and not let workers portray themselves as our victims. If you want to play us vs. them, then do it with the competition.

7. Increasing financial and environmental debt. It doesn’t seem that this trend is going to stop or go away any time soon. Grim realities such as the mortgage scandal, the oil spill, and global warming aren’t going away. In fact, there’s no reason for things not to get worse. We’ve been mortgaging our future for our present and will leave an awful legacy for our children and grandchildren.

What this means for your business: First, we have to teach employees financial literacy. HR That Works members can start by watching the Accounting Game Webinar. Then watch Coach George’s webinar on what you can do about the impact of financial stress on your workforce. You don’t have to become LEED-certified, but you can certainly attempt to recycle paper and reduce waste. Encourage your employees to come up with suggestions about how you can make a greener company. It’s a “cool” thing for them to do.

8. Sometimes the greatest risk lives next door. If the Tucson tragedy taught us anything, it’s that mayhem can show up anyplace at any time.

How this applies to your business: Sometimes we’re so busy looking at the risks we face from the “outside” we forget that the greatest risks that lie closest to home. For example, most auto accidents occur within a one-mile radius of our home or business. The greatest risks we face in our business generally come from the inside as well: The sales manager who did such a bad job that sales were cut in half; the marketing executive that endorsed a risky campaign damaging our brand for years; the driver addicted to crystal-meth who drove head-on into that family. In the end, the greatest risk to you or your business is … you and your business!

9. Last, but not least, there’s been a change in our Zodiac signs! Millions of new-agers have been thrown into psychic turmoil. Think of all the wasted horoscopes. The horror of it all.

What can you do about this at work? Absolutely nothing but to sympathize with those folks who thought that it meant anything in the first place.

That’s my report of today’s news and how it affects your business.

Are Your Employees Worth What You’re Paying Them? Really?

In an interesting Freakonomics podcast, authors Levitt and Levine discuss whether expensive wines are worth the price. Their conclusion: They are not. Here’s an example of an interesting experiment. Participants were asked to rate two different wines. All they knew was that one was a $10 bottle and one was a $50 bottle of wine, when in fact it was the same $20 bottle. The participants overwhelmingly chose the $50 bottle as having the better taste. Interestingly, some participants asked the testers if it could, in fact, be the same bottle of wine. When told that they’d have to decide for themselves, most of them reached the “logical” conclusion that they had to be different wines because of their different pricing – so they rated the more expensive wine as better.

Here’s the point: We often value things more simply because we pay more for them. If this holds true for wine and cars and dates, then why wouldn’t it be true for employees? Employers have tried to finagle with compensation systems from Day 1. What’s the right mix of compensation to help generate the greatest return on investment of an employee or workforce? Because it’s a mistake to underpay or overpay employees, how do we decide just how much to? Here’s an easy three-part solution:

1. Identify the market rate. What does the “average” employer pay for a certain level of employee? You can learn this by going to the statistics at BLS.gov, your state labor agencies, sites such as Salary.com, or your local employers’ group. You might also have industry-related associations and can hire some competitive intelligence to provide these rates. In my experience and opinion. To pay anything more than 25% above grade is essentially throwing away money. For example, in the fast food industry if $8.50 is the norm, it might make sense to pay $10.50, as In-N-Out Hamburger does in California, or the premium Costco pays its employees. However, it doesn’t make sense to pay even 1% above grade if it’s not going to buy you a more productive employee. Perhaps there are other ways to attract productive employees. You might be able to attract them by being the most outrageous or flexible or cutting-edge workforce.
2. Think team bonuses. When I perform employee surveys at companies, I always ask whether employees prefer incentives based on individual performance, on that of a team, or of the entire company. Over the years, I’ve found that where there’s a great deal of trust, people prefer team-based incentives. If trust is low, they prefer individual incentives. Of course, we trust those people to whom we’re closet. As an owner, if I wanted to help generate trust, I would offer team-based incentives. As the saying goes, “A rising tide floats all boats.” I would recommend a bonus (say 10% of net profits) and then distribute it based on employee’s gross compensation. For example, if one employee makes $50,000 per year and one employee makes $25,000, the person making $50,000 gets twice the bonus. This is a simple formula that avoids a lot of wasted time and energy trying to finagle 2% here, 4% there, etc. If an employee displays outstanding performance, the chances are that they’re in line for a raise or promotion. This is how you manage going forward.
3. Award people immediately on an individual basis when they go the extra mile. According to Barber’s 1001 Proverbs, “The greatest benefit is the one last remembered.” Don’t underestimate the power of: (a) rewarding what you want to reinforce, and (b) doing it immediately. These rewards need not be expensive; they’re as much about acknowledgment as they are about money. Of course, a little bit of cash helps too.

The Causes of Workers Compensation Retaliation Claims

I conducted an examination of California Labor Code, Section 132(a) Workers Compensation retaliation claims filed over many years. When filing a Section 132(a) claim, “in addition to establishing that the industrial injury has resulted in some detriment, the worker must also prove that he or she was singled out for disadvantageous treatment because of the injury.” This is typical of how other states handle Workers Comp retaliation claims. Some states allow workers to bring separate claims outside the comp system. Here’s a summary of these cases:

Conduct that will not result in a 132(a) verdict:

• Where there is truly no work available.
• Where the employee is unfit for duty because they will risk further injury or aggravation to an injury.
• Where there are safety issues related to the employee or third parties.
• Where there’s a business necessity (such as lack of funds or a change in company direction).
• If they were terminated for cause (and consistently with how others were treated in engaging in similar wrongdoing).
• If there’s a layoff or reduction in force.

What’s not OK:

• If there/s a change in pay, hours or duties without a business justification.
• Where they were “singled out” or otherwise treated “differently” than others.
• Where the company makes return-to-work or light-duty decisions without medical proof.

Note that ERISA often preempts benefit discrimination claims in this area.

The Indirect Cost of Accidents and Lawsuits

Risk management experts, safety experts, accountants, actuaries, and other professionals make the distinction between direct and indirect costs of accidents, lawsuits, and so forth. For example, the cost of turnover in the HR That Works Turnover Cost Calculator includes the direct costs (such as paying for a Help Wanted ad) and indirect costs (such not growing the business due to lack of manpower). Two of the most commonly insured employee risks are those for work-related injuries and employment practice claims. This means that the direct costs associated with a Work Comp injury are those related to medical expenses and expense reimbursement, which the Workers’ Compensation carrier usually pays.

We usually recommend that our clients pay the compensatory portion of the claim because if they don’t, the insurance company will pay it and then get their money back by increasing your experience modifier over the next three years. In a sense, they don’t pay these claims, they finance them. In addition to the increase in the experience modifier (MOD) and cost of future insurance, there are also indirect costs:

• Damage to property (building, tools, machinery, etc.)
• Emergency supplies, cost
• Possible media exposure/brand change
• Investigation time, claim management time
• Affect on employee morale
• Overtime, costs of replacing employee
• Increased experience modifier
• Damage to client relations if accident is “on site”
• Injury to third parties
• Additional legal fees

Of course, these ratios depend on the type of claim or injury, type of business, days lost from work, and so forth. When it comes to an employment practices claim, direct costs are for attorney fees, litigation costs and any settlement or verdict payout. The indirect costs include: Loss of employee morale, damaged customer and client relations, copycat claims, loss of knowledge base, training, and experience.

The risk management literature offers a wide range expert opinion on the range of direct to indirect costs. Only one out of seemingly dozens of surveys identifies indirect costs as lower than a 1:1 ratio to the direct costs. Some go as high as 20 times the direct costs (for example, when an expensive piece of machinery is destroyed in the process). Based on my personal experience and that of experts I agree with, we can safely assume at least a 1:1 ratio in most circumstances. For example, you might have to pay out $50,000 to settle the lawsuit, plus another $50,000 to replace the employee! Unfortunately, these indirect costs are often uninsurable, and in many cases dwarf the insurable costs in a given risk scenario. Interestingly, the indirect cost ratio has been diminishing as medical and legal expenses continue to soar.

These ratios also depend on such factors as:

• Type of claim/injury
• Type of business
• Claim value
• Days lost from work
• Legal jurisdiction
• Management response

Finally, check out the $afety Pays e-tool.

The ‘Going and Coming’ Rule

The theory of respondeat superior makes employers vicariously liable for wrongful acts committed by employees during the course and scope of their employment. However, the “going and coming” rule generally exempts employers from liability for wrongful acts committed by employees while on their way to and from work, because employees are said to be outside of the course and scope of employment during their daily commute. A well-known exception to the going-and-coming rule arises if the use of the car gives some incidental benefit to the employer. Thus, the key issue becomes whether the employer derives an incidental benefit from the employee’s use of the car. This has been referred to as the “required-vehicle” exception. The exception can apply if the use of a personally owned vehicle is either an express or implied condition of employment, or if the employee has agreed, expressly or implicitly, to make the vehicle available as an accommodation to the employer, and the employer has “reasonably come to rely upon its use and [to] expect the employee to make the vehicle available on a regular basis while still not requiring it as a condition of employment.”

For example, Section 401.011(12) of the Texas Labor Code, which codifies this general rule, states:

Course and scope of employment means an activity of any kind or character that has to do with and originates in the work, business, trade, or profession of the employer and that is performed by an employee while engaged in or about the furtherance of the affairs or business of the employer. The term includes an activity conducted on the premises of the employer or at other locations. The term does not include:

(A) transportation to and from the place of employment unless:

• the transportation is furnished as a part of the contract of employment or is paid for by the employer;
• the means of the transportation are under the control of the employer; or
• the employee is directed in the employee’s employment to proceed from one place to another place; or

(B) travel by the employee in the furtherance of the affairs or business of the employer if the travel is also in furtherance of personal or private affairs of the employee unless:

• the travel to the place of occurrence of the injury would have been made even had there been no personal or private affairs of the employee to be furthered by the travel; and
• the travel would not have been made had there been no affairs or business of the employer to be furthered by the travel.

In insurance policies, the general definition describes coverage, and travel must meet both its components to be in the course and scope of employment. Subsections (A) and (B) are exclusions, each followed by exceptions. Subsection (A) has three, disjunctive exceptions; if any one is met, the exclusion does not apply, and travel to and from work is not excluded from the course and scope of employment. Subsection (B) has two, conjunctive exceptions and applies unless both are met. Subsection (B) is somewhat convoluted. More simply put, it does not exclude work-required travel from the course and scope of employment merely because the travel also furthers the employee’s personal interests that would not, alone, have caused him to make the trip.

A recent California case, Lobo v. Tamco, 182 Cal. App. 4th 297 (Cal. App. 4th Dist. 2010), interpreted this standard very broadly. Here are the facts of this case:

“Daniel Lobo, a San Bernardino County deputy sheriff, was killed on October 11, 2005, as the result of allegedly negligent operation of a motor vehicle by defendant’s employee Luis Duay Del Rosario, while acting in the course and scope of his employment by defendant Tamco. Del Rosario was leaving the premises of his employer, Tamco. As he drove his car out of the driveway and onto Arrow Highway, he failed to notice three motorcycle deputies approaching with lights and sirens activated. Deputy Lobo was unable to avoid colliding with Del Rosario’s car and suffered fatal injuries.

“Deputy Lobo’s widow, Jennifer Lobo, filed a wrongful death suit on behalf of herself and the Lobos’ minor daughter, Madison. Kiley and Kadie Lobo, minor daughters of Deputy Lobo, filed a separate wrongful death action through their guardian ad litem. Both suits alleged that Del Rosario was acting within the course and scope of his employment by Tamco at the time of the accident…..

“When Del Rosario left Tamco on the day of the accident, he was going home. However, if he had been asked to visit a customer site, he “would have gotten in [his] car and used [his] car to go to that facility,” just like on any other day. He kept boots, a helmet, and safety glasses in his car.

“This evidence is clearly sufficient to support the conclusion that Tamco requires Del Rosario to make his car available whenever it is necessary for him to visit customer sites, and that Tamco derives a benefit from the availability of Del Rosario’s car. Tamco, however, emphasizes that it was rare that Del Rosario visited customer facilities or jobsites, and contends that in all cases in which the “required-vehicle” exception to the going and coming rule has been found applicable, driving was an “integral” part of the employee’s job and that Del Rosario’s occasional use of his own car to visit customers is insufficient as a matter of law to invoke the exception.

“Tamco has not cited any case in which a court has addressed a contention that the employee’s use of his own car was too infrequent to warrant application of the exception and we have found none.”

Lesson learned: Realize that allowing employees to use their personal vehicles on company business can expose you to liability. Make sure that employees know the parameters and have good driving records, and make sure there is plenty of insurance to handle any possible claims.

Failure to Communicate Ruins Employee’s FMLA Claim

The Seventh Circuit Court of Appeals recently upheld the termination of an employee who sued, alleging FMLA interference and retaliation after termination for failure to contact his employer during a nine-day leave of absence to address a medical emergency involving his mother. In Righi v. SMC Corp. of America, a sales representative, while attending a mandatory training seminar, received word that his mother was experiencing a medical emergency. The employee left the training session and, despite informing a co-worker that he was leaving due to a family emergency, made no attempt to contact his supervisor. The next day, the employee sent his supervisor an e-mail stating that his mother, who was a diabetic, had slipped into a coma. After stating that he would need the next few days off to make arrangements for his mother’s care, he wrote: “I do have the vacation time, or I could apply for the Family Care Act, which I do not want to do at this time.” Upon receiving the e-mail, the supervisor repeatedly attempted without success to contact the employee by phone to inquire further about his need for leave.

Finally, after nine days of silence, the employee called his supervisor and was terminated the next day for violation of the employer’s leave policy, which provided that an unapproved absence of two or more consecutive days was grounds for termination. After the district court granted summary judgment on the employee’s claims of FMLA interference and retaliation, the employee appealed. The Seventh Circuit Court of Appeals held that the employee’s e-mail, in which he mentioned that his mother was in a diabetic coma, was sufficient to alert the employer that the employee might qualify for FMLA leave, and that the employer was obligated at that point to make further inquiry regarding the employee’s need for FMLA leave. The Court also found that the employer properly attempted to fulfill its obligation by making numerous calls to the employee and that the employee’s failure to respond to his employer’s calls caused his FMLA claims to fail. The employee was required under both the FMLA and his employer’s written policy, to contact his employer to let the employer know of the likely duration of his requested leave, which he failed to do.

Article courtesy of Worklaw® Network firm Shawe Rosenthal.

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