HR That Works Blog

Here’s what figures to be ten of the top audit questions facing employers in the New Year. You will note no new surprises. Fact is, 20% of employment practice risk categories cause the majority of claims.

1.  Are you properly using credit and background checks in the hiring process? 

The EEOC as well as state legislatures have severely constricted your ability to acquire and use criminal and credit records. We think it’s very important to get as much information as possible during the hiring process—just make sure you do it right. Whether you work with our strategic partner, Global HR Research or another company, make sure they stay on top of the laws in your state.

2.  Have you properly managed your I-9 compliance process?

HR That Works Members were treated to an excellent webinar on the I-9 form. It generated a lengthy question and answer session afterward which was converted into a FAQ. That FAQ is available on HR That Works. You can see a detailed I-9 audit checklist by clicking here.

3.  My employees are properly classified as exempt.

Wage and hour claims continue to cause employer headaches. We see no reason for this tide to be stemmed in 2012. The bottom line is this: If you’re not 100% certain an employee is classified as exempt, you’d be better off labeling them as non-exempt. If you’re an HR That Works Member and realize you may have a problem, see the Special Report in the Wage and Hour Training Module entitled Now That I’ve Got a Problem, What Should I Do About It?  See www.dol.gov/whd/flsa. California employers should check out www.dir.ca.gov/dlse/dlse.html.

4.  Are your independent contractors really independent contractors?

 The NLRB, IRS, and state taxation authorities are coming down hard on the 1099 misclassification problem. Make sure your 1099 contractors really are not employees. Also make sure any leased or temp employees are properly treated by their employers too. HR That Works Members should consider the Independent Contractor Training Module which also includes an audit, checklist, and sample agreement. See the IRS’s guide to differentiating between an employee and an independent contractor.

5.  We are staying on top of National Labor Relation Board requirements.

The private workplace thought they had nothing to worry about when it came to the NLRB. Now they know that’s not the case. Not only has the Board made it much easier to organize your business, but they’ve also stepped in to the social media landscape. I suggest you subscribe to the NLRB’s notification service by clicking here. HR That Works Members should watch the various webinars produced on managing NLRA concerns. Remember, all employers are now required to put the new NLRA poster up in their workplace by April 30th. Click here to double check as that date has already been postponed twice due to some serious employer complaints about it! 

6.  We have our compliance policies and procedures up to date.

Despite the vast amount of new legislation, the most common claims in the workplace continue to consist of sexual harassment, race discrimination, and wrongful termination. Do you have your employee handbook, training, and other compliance measures up to snuff? Take advantage of the Compliance Quiz, Sexual Harassment and Discrimination Training Modules.  

7.  Do you have a robust employment practices liability policy? 

Less than half of companies with less than 1,000 employees have what is known as employment practices liability insurance. This is a big mistake! Given the fact that the average employment practices verdict hovers around $250,000, a company would be remiss not to purchase inexpensive employment practices liability insurance and thereby cap their risk exposure anywhere from $5,000-$25,000. Click here to see a checklist that will help you when you purchase employment practices liability insurance.

8.  Have you done what you need to do to protect yourself from cyber liability?

 This is a rapidly growing risk exposure. What many companies don’t realize is that more than half of the exposure comes from within its four walls. Employees rip off more confidential and valuable information than any third parties do. In fact, internal employee data theft is alleged to cost employers in the billions! (As Austin Powers would say, “With a B.”) The best advice is to work with third party experts to make sure you have both risk management protocols in place as well as sufficient cyber liability insurance. Is HR working with IT and riskmanagement to get a handle on this exposure?

9.  I have properly managed personnel files.

Remember, privacy has become an overwhelming concern, as has the need to defend yourself should you get hit with an employee claim. Well-maintained personnel files keep you out of trouble. You should make sure to separate out medical information, financial information, immigration and claims information from day-to-day personnel management files. Make sure that your personnel files are kept under lock and key with need-to-know-only access, that they contain all the documents that they should, and that they are stored for a sufficient period of time (anywhere from one to seven years depending on the document). If you have or are moving to electronic storage, make sure to identify your scanning protocols, storage, permissions, signature rights, etc.

10. Do you have you leave management act together?

There are additional concerns including social media risks, leave management, disability accommodation, whistleblowing claims, ERISA claims, and much more. Pretty much guarantees an eventful New Year!

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.

A review of the EEOC’s press release from the 30-day period between December 13 and January 13 reveals the following:

Pepsi to Pay $3.13 Million and Made Major Policy Changes to Resolve EEOC Finding of Nationwide Hiring Discrimination Against African Americans 1/11/12

Family Dollar Stores of Virginia to Pay $45,000 to Settle EEOC Sexual Harassment Lawsuit 1/11/12

Matrix L.L.C. Will Pay $450,000 to Settle EEOC Race Discrimination and Retaliation Lawsuit 1/6/12

DynCorp to Pay $155,000 for Sex-Based Harassment and Retaliation In Iraq 1/6/12

Bank of Albuquerque Discriminated on the Basis of Age and Sex, EEOC Alleges in Lawsuit 1/4/12

Grand Central Partnership Fired Rastafarian for Complaining of Threatened Violence, EEOC Says 1/3/12

RCC Consultants, Inc. Sued for Disability Discrimination 12/29/11

EEOC Sues Midwest ISO for Disability Discrimination 12/23/11

Mesa Systems Sued by EEOC for National Origin Discrimination 12/23/11

American Apparel Agrees to Settle EEOC Disability Bias Suit for $60,000 12/19/11

Jim Robinson Ford-Lincoln-Mercury to Pay $56,000 to Settle EEOC Disability Lawsuit 12/16/11

EEOC Retaliation Case Against Cognis to Proceed, Federal Judge Orders 12/16/11

Wal-Mart to Pay $275,000 to Former Employee Fired after Cancer Surgery 12/16/11

EEOC Launches Small Business Task Force 12/15/11

EEOC Sues Wal-Mart for Disability Discrimination and Retaliation 12/15/11

B&B Pharmacy in Bellflower to Pay $70,000 for Disability Discrimination In EEOC Suit 12/15/11

M. Slavin & Sons to Pay $900,000 to Settle EEOC Discrimination Suit 12/15/11

Vitas Healthcare Sued By EEOC in Disability Discrimination Lawsuit 12/14/11

Dairy Queen Restaurant Sued By EEOC for Sexual Harassment and Retaliation 12/14/11

Federal Court Signs Order for Blockbuster Inc. To Pay Over $2m to Settle EEOC Suit for Sex, Race and National Origin Discrimination, Retaliation 12/14/11

UPS Unit to Pay $95,000 to Settle EEOC Disability Discrimination Suit 12/14/11

King Soopers to Pay $80,000 to Settle EEOC Disability Discrimination Lawsuit 12/13/11

Bottom line: The EEOC is cranking it up. Make sure you have your disability, discrimination, and sexual harassment training and tools up to date…or you could be the next press release!

President Obama recently signed into law the “VOW to Hire Heroes Act” (H.R.674), a law that provides tax credits for employers who hire unemployed veterans and veterans with service-related disabilities. The new law allows a company to claim a tax credit of up to $2,400 if it hires veterans who have been looking for work for at least one month. The maximum credit is increased to $5,600 for hiring veterans who have been searching for work for at least six months. Additionally, employers may be granted a $9,600 tax credit for hiring out-of-work veterans with service-related disabilities.

The new legislation also amends the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”)—which was enacted to prohibit civilian employers from discriminating against employees engaged in military service—to recognize claims of “hostile work environment” on account of an individual’s military status. The law states that employees who perform military service “shall not be denied initial employment, reemployment, retention in employment, promotion, or any benefit of employment” on the basis of that service. However, courts had previously rejected the notion that the statute creates a cause of action for “hostile work environment” harassment against military service members. By clarifying that “benefit of employment” includes the “terms, conditions, or privileges of employment,” the new legislation brings the USERRA in line with Title VII and the Americans with Disabilities Act, both of which include the phrase “conditions…of employment.”

EEOC Approves Draft of Rule Amending Age Discrimination Regulations The Equal Employment Opportunity Commission (“EEOC”) has approved a draft final rule amending its Age Discrimination in Employment Act (“ADEA”) regulations in light of U.S. Supreme Court decisions addressing disparate impact claims and the “reasonable factor other than age” (“RFOA”) defense.

The proposed rule is based on the EEOC’s analysis of Smith v. City of Jackson (2005) 544 U.S. 228 (2005) (holding that an employment practice that has a disparate impact on older workers is discriminatory unless the practice is justified by a reasonable factor other than age) and Meacham v. Knolls Atomic Power Lab. (2008) 128 S. Ct. 2395 (holding that the employer bears the burden of proving the RFOA defense).

Under the proposed rule, a “reasonable” factor is one that is objectively reasonable when viewed from the position of a reasonable employer under like circumstances. The rule explains that whether a particular employment practice is based on RFOA turns on the facts and circumstances of each particular situation and whether the employer acted prudently in light of those facts. According to the EEOC, this standard is lower than Title VII’s business-necessity test but higher than the Equal Pay Act’s “any other factor” test. The standard is intended to represent a balanced approach that preserves an employer’s right to make reasonable business decisions while protecting older workers from facially neutral employment criteria that arbitrarily limit their employment opportunities.

To assess whether an employment practice is based on RFOA, the proposed rule provides a non-exhaustive list of factors to be considered:

• whether the employment practice and the manner of its implementation are common business practices;
• the extent to which the factor is related to the employer’s stated business goals;
• the extent to which the employer took steps to define the factor accurately and to apply the factor fairly and accurately (e.g., training, guidance, instruction of managers);
• the extent to which the employer took steps to assess the adverse impact of its employment practice on older workers;
• the extent to which the employer took preventive or corrective steps to minimize the severity of the harm, in light of the burden of undertaking such steps; and
• the existence of a lesser discriminatory alternative and the reasons why the employer selected the option it did.

The proposed rule also emphasizes that in order for the RFOA defense to apply, the challenged practice must be based on an objective, non age-related factor (e.g., salary, seniority, etc.).

The EEOC’s final draft regulations now go to the White House Office of Management and Budget for a review period that takes approximately 90 days. If the draft regulations are approved, they will return to the EEOC for a final vote before taking effect.

To learn more go to http://www.whitehouse.gov/blog/2011/11/21/president-obama-hire-veteran.

Article courtesy of Pettit Kohn (www.pettitkohn.com).

Watch Don’s 35-minute video on what you must know about a recent NLRB Memo on Social Media today! HR That Works members can see the updated Social Media Policy and Special Report in the Social Media Training Module.

Revised regulations implementing the Americans with Disabilities Act (ADA) take effect on March 15, 2011. The regulations apply to the activities of more than 80,000 units of state and local government and more than seven million places of public accommodation, including stores, restaurants, museums, sporting arenas, movie theaters, doctors’ and dentists’ offices, hotels, jails and prisons, polling places and emergency preparedness shelters.

For more information visit https://www.disability.gov/civil_rights/laws_%26_regulations/americans_with_disabilities_act.

Human Resources – 5 Ways Guarantee Hiring a Loser

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Click here to view Don’s Hiring 101 video along with free hiring tools.

In a Federal case emanating from Rhode Island, Ophthalmic Surgeons, Ltd. v. Paychex, Inc., http://www.ca1.uscourts.gov/cgi-bin/getopn.pl?OPINION=09-2291P.01A,  the court ruled that a bunch of ophthalmologists could not point fingers at Paychex where their office manager and payroll contact paid herself an extra $233,159 over five years. To me, the relevant language in the case is right here:

“OSL alleges that during the years that Connor requested unearned paychecks, 2001 to 2006, its employees were paid on a weekly basis. During some years, OSL asked Paychex to run payroll using a bi-weekly pay period.

In 2001, Connor began requesting that Paychex direct deposit into her bank account more money than required to pay her annual salary. During the pay periods when Connor requested more than her base pay, she requested that Paychex split her pay into two direct deposit payments. At some point, a Paychex representative told Connor that issuing her more than one payment for a given pay period was more expensive for OSL. Connor stated that she wanted to split her checks because a single larger check would result in a larger tax withholding. Paychex did not contact anyone at OSL to verify Connor’s request. [Italics mine]

It is undisputed that between 2001 and 2006, Connor directed Paychex to pay her, and Paychex did in fact pay her, a total of $233,159 more than her authorized annual salary. It is also undisputed that Paychex sent to OSL reports confirming all payments made. These reports were sent to Connor’s attention and Dr. Andreoni alleges that he saw none of these reports because they were not sent directly to his attention. OSL discovered the unauthorized payments when another employee took over Connor’s duties.”

Here’s all you need to know: The Paychex folks…and any other payroll company I’m sure…is not going to question the authority of the person you appoint to work with them. EVEN if they double their pay and issue duplicate paychecks…and they will contractually cover themselves against any of their own screw ups! I can’t fault the ruling. It is the business owner’s ultimate responsibility to know where the money goes. All of it! How do you miss $50,000 per year? Must have been making a load of bucks to let that slip through the cracks. Bottom line:  If you can’t spend the time doing it yourself, hire a bookkeeper or CPA to check the numbers monthly. Don’t create social experiments by not having checks and balances.