Employee Ideas - A Key Leverage Point for the HR Professional
Alan Robinson and Dean Schroeder are the authors of Ideas Are Free, published by Berrett-Koehler in April 2004 (excerpts available at http://www.ideasarefree.com). They have worked with more than two hundred companies in eleven countries, and both have served on the Board of Examiners of the Malcolm Baldrige National Quality Award. Robinson is a professor at the Isenberg School of Management at the University of Massachusetts and Schroeder is the Schulz Professor of Management at Valparaiso University.

Human resource professionals have to operate in an increasingly complex and fast-changing business environment. Yet their organizations still depend on them to take the lead in attracting and retaining good employees, in giving them the training and development they need, and in ensuring a positive climate in which management and labor work well together. How can managers keep their people fully engaged and committed to building the company’s future while many employees are concerned—because of constant restructuring, downsizing and outsourcing —about whether they will be a part of that future? The answer to this problem is found, surprisingly enough, in the ideas of precisely the same front-line people these organizations are trying to motivate.

We recently completed a six-year global study of how companies promote ideas from their front-line employees. More than 150 organizations in 17 countries were involved, operating in a broad variety of industries, and ranging in size from small family-owned businesses to large multinational corporations. We contrasted organizations with high-performing idea systems -systems whose 20, 50 and even 100 ideas per employee each year generated significant competitive advantage - with those whose idea systems were marginal or even dysfunctional.

We wanted to document the benefits of employee ideas and to discover what works to promote them, what doesn’t, and why. We found that a good idea system is a powerful tool that HR professionals can use to succeed at their most difficult tasks. It can even be used to transform an entire corporate culture.

This article is structured in two parts. The first shows how an idea system can be used to improve critical aspects of HR performance. The second outlines some of the more important things an HR professional needs to know to set up and run such a system.

The impact of a good idea system
The Ideas Are Free study documented the dramatic impact that a high-performing idea system has on organizational performance and competitiveness. Part of the reason why is the power these systems exert on employee retention and engagement, labor-management relations, and job security. In this section, we explain with case examples, how this power works.

• Attracting and retaining good employees
When Mary Ann Kehoe took over as managing director of Good Shepherd Services in 1991, the nursing home was in bad shape. Morale was low, employee turnover was over 120%, and the organization was in financial trouble. She was the tenth director in eleven years.

Long-term care is a tough industry. Pay is low, especially for front-line workers, and turnover is high. Many nursing homes are forced to operate understaffed or to rely on temporary workers. For the people providing the direct care, the work can be quite unpleasant.

Kehoe realized that unless Good Shepherd changed the way it operated it might not survive. She thought the answer lay in greater efficiency. As an experienced nurse, she knew that front-line staff had many improvement ideas, because they were the ones dealing directly with the residents. The problem was that the traditional rules-driven hierarchical culture of the long-term care field gave those on the front lines little chance to be heard. If Kehoe could tap these improvement ideas, she could also stop the de-motivation of her staff.

But she also realized that simply asking direct-care staff for their ideas would not be enough. She knew that she needed some kind of system, and her people needed more knowledge about the state of the art in long-term care to come up with good ideas.

Kehoe gathered a small group of like-minded nursing home directors and, with the help of leading experts in the long-term care field, created a set of training modules that focused on the critical aspects of resident care. She also restructured the way the care was managed and delivered. Rather than rotating people for the convenience of scheduling, she created permanent care teams, one for each shift in each wing.

The teams consisted of nurses, certified nurses aides, dietary aides, and housekeeping staff. The stable team membership allowed employees to get to know the residents better, learn their individual needs and personalities, focus ideas on improving each one’s quality of life, and work together to develop and implement their ideas.

The results of going after front-line ideas at Good Shepherd have been amazing. Employee retention is now above 95%. Instead of searching frantically for bodies to fill slots, GSS now has a waiting list for most jobs. Moreover, many staff members who do leave for higher wages or better hours (staffing at Good Shepherd is 24/7 and wages are set at industry averages), eventually return. Some ten percent of the current staff has returned to Good Shepherd after leaving to work elsewhere.

The Good Shepherd Nursing Home has the best record in the entire United States for government quality inspections, and the State of Wisconsin legislature has recognized it for excellence in health care. Kehoe credits Good Shepherd’s high performance to the organization’s success in getting direct-care employees fully engaged in improving the lives of residents through their ideas.

• Improving relations and attitudes
At Ink Systems, Director Dick Williams, asked a group of union workers to help develop their unit’s approach to “employee involvement.” The group pointed out that they and their colleagues had a lot of ideas on how to make the operation run better, but didn’t believe the company would listen to them. With Williams’ encouragement, they set up a process for soliciting and handling ideas, and asked Charlie Tichy, a union worker and outspoken critic of many management practices, to run it. If a hardened union workforce was going to be convinced that the company was ready to take their ideas seriously, who better to convince them than one of their own?

In short order, the program became very successful. The 130 hourly employees in the Ink Systems Unit submitted some 300 ideas in the first three months and some 1,200 ideas in the first year.

Soon Williams was promoted to vice president of manufacturing, and the idea system was implemented company-wide as a joint union-management initiative.

The performance improvement and cost-savings from the system have been significant, and labor/management relations have improved dramatically. People who once refused to speak with each other without a union steward present, now socialize and play on the same sports teams. Williams observed that the idea initiative also taught his managers respect for their employees. As he put it, managers learned that their employees could make them look very good, if only they let them.

• Employee ideas lead to job security
Milliken & Company is a global fabric and specialty chemicals company. It is one of only two companies in the world that has won both the Malcolm Baldrige National Quality Award and the European Quality Award. In a number of its textile product lines, it competes with companies in developing nations whose prevailing wages are less than one twentieth of those in Europe, Japan, and the United States, where Milliken operations are located. To be successful, the company has to out-manage its competitors.

Over the last two decades, Milliken has actually been able to increase its advantage over them, a feat that Roger Milliken, chairman and CEO, attributes in large part to the company’s idea system. Milliken employees averaged 110 ideas each, every year. These ideas have given the company a competitive advantage that their global competitors can’t come close to matching.

At a Milliken facility in Denmark, for example, the director showed us a number of looms, each of which had literally hundreds of minor improvements made to it through worker ideas. Cumulatively these ideas had doubled or tripled the machines’ speeds and made them capable of doing things their designers had not even thought of. While competitors can easily purchase the same equipment, it is much harder for them to duplicate the effect of all these improvements.

Until its low-wage competitors find ways to promote as many good ideas from their workers, Milliken’s idea system guarantees the company significant competitive advantage and its people job security. And because it sees its people as a resource rather than a cost, Milliken is not about to outsource the work they do.

Characteristics of a good idea system
In each of the cases we have outlined, the idea system solved critical HR issues which were having direct impact on the bottom line. It is important to realize that the state of the art in managing ideas has moved well beyond the traditional suggestion box. In fact, high-performing idea systems are in many ways the opposite of suggestion boxes.

Suggestion box systems, even those with modern interfaces such as on-line idea submission, tend to go after big ideas, for which they offer substantial individual rewards. Giving suggestions is also voluntary, and responsibility for processing them is centralized. Companies with best-practice idea systems, on the other hand, go after small ideas, and - because they understand that employees offer ideas because they want to see them used - concentrate on rapid implementation. Instead of being voluntary, ideas are considered part of everyone’s job, from the janitor to the CEO.

• Why it is better to go after small ideas
Everyone is attracted by big and dramatic ideas. The more far-reaching their implications, the more we are drawn to them. It is not surprising that managers, when thinking about employee ideas, envision the “home runs” - the breakthrough innovations that will propel their organizations to industry dominance, or the suggestions generating millions of dollars in revenue or cost-savings. But world-class systems focus on small ideas. They do this for a number of reasons, three of which we will describe here.

1. While big ideas come along rarely, everyone constantly has small improvement ideas, most of which deal with making their work easier and more productive. Giving them the right to speak up about these ideas, and (in the context of a process) implement the ones that make sense, empowers people and engages them more in their work. When people see their ideas taken seriously and implemented, they feel they are having an impact - are making a difference - and their attitudes change. An idea system that captures and implements large numbers of ideas is an absolutely fundamental tool for building ownership and commitment, while at the same time improving efficiency.

2. It is impossible to achieve excellence in any aspect of performance - efficiency, quality, responsiveness, customer service, or simply keeping costs down - without the ability to pay attention to details that large numbers of small ideas provide. It is also worth noting that it is much more rewarding, financially and intrinsically, to work in an organization striving for excellence than one which is limping along with little ambition to improve.

3. Unlike big ideas, small ideas provide sustainable competitive advantage. The bigger an idea, the more visible it is to competitors, who will quickly copy or counter it. Small ideas, on the other hand, are much less visible and are often situation-specific. They tend to remain proprietary and, over time, can accumulate into a considerable cushion of advantage, as was illustrated by the example of the looms at Milliken Denmark.

• The pitfalls of rewards
Many of the organizations with low-performing idea systems created problems for themselves with poorly conceived reward schemes. The most common of these offer a percentage - usually between five and twenty-five percent - of the first year’s savings or profit from each idea. It is surprising how dysfunctional such an approach can be.
As we have already mentioned, such rewards aren’t needed anyway. People don’t need to be bribed for their ideas. They already want to offer ideas and are thrilled when these are used. The most powerful incentive a company can give a person to offer ideas is the knowledge that they will be given a fair hearing and implemented quickly if they are worthwhile. An effective process, therefore, generally takes care of the issue of rewards.

Milliken, for example, offers no extra rewards for ideas. Some others with good systems offer token rewards, intended as a “thank you” rather than a reward. The benefits of ideas are shared implicitly through greater job security, higher wages, and a better work environment.

Our Ideas Are Free study also documented the extensive dysfunction created by potentially large percentage rewards for ideas. Among other things, large rewards create the need for bureaucracy (one Fortune 500 company estimated it takes an average of four hours to calculate the value of an idea); they undermine teamwork (people steal ideas from each other and withhold ideas in group forums in order to be able to submit them to the system for a reward); they cause people to limit their ideas to the kinds that generate readily quantifiable savings and revenue (most improvement ideas don’t); and they even cause management to behave badly (our study documented a number of cases of fraud and unethical behavior with respect to calculating and giving rewards).

• Making ideas part of everyone’s job
Many managers behave as if they expect their employees to check their brains at the door. Although they would never voice this publicly, their attitudes communicate clearly enough that “we do the thinking, you do as you are told.” Yet because they are the ones doing the work, front-line employees see a great many problems and opportunities that their managers don’t. Their ideas more often than not make their managers’ work a lot easier.

High performing idea systems make thinking a part of every employee’s job, and getting ideas a part of every manager’s job. Idea performance is tracked and people are held accountable for it. The quantity and quality of an employee’s ideas constitute a primary measure of his or her contribution. Moreover, the success a supervisor or manager has at promoting employee ideas is one of the best indicators of his or her leadership ability.

In summary, an idea system can be a powerful tool for HR managers. A good idea system provides a measurable and manageable approach to transforming corporate culture. It can deliver key HR outcomes in a way almost nothing else can. It is vital for every HR professional to know what an idea system can do for his or her company, and how to set one up and run it.

Georg

Part 1 of this article appeared on the cover of last month’s issue (May 2004). Although same-sex marriages have now become legal in Massachusetts, in California the issue remains unsettled. However, many employers as a matter of policy have elected to provide spousal benefits to domestic partners. Part 2 of this article is a continuation of the principle workplace issues that have arisen with same-sex marriages and the implications an employer may wish to consider as it addresses them.

Leave of absence issues
California already provides protection for domestic partners who wish to use accrued sick leave to care for an ill domestic partner. This statute, Labor Code Section 233, unofficially referred to as the “Kin Care Statute,” permits an employee to use a specified amount of his or her sick leave to care for an ill child, parent, spouse or domestic partner. This statute does not supplant family leave rights under the California Family Rights Act or the federal Family and Medical Leave Act. It exists side by side with FMLA/CFRA.

Effective January 1, 2005, registered domestic partners in California will be entitled to take unpaid family leave under the California Family Rights Act on the same basis as spouses. This is part of the reform enacted in Assembly Bill 205, adopted in 2003. Until January 1, 2005, California law does not require that employers provide family or medical leave to domestic partners or to unmarried couples (whether same or opposite sex). However, some employers do voluntarily provide family leave to domestic partners or unmarried couples.

FMLA/CFRA leave is generally unpaid and is available only to employees who have worked for at least twelve months with the employer, who have worked at least 1250 hours during the past twelve months, and who are employed at a facility employing fifty or more persons within a seventy-five mile radius. The right to leave under FMLA/CFRA is limited to care for a spouse, dependent child or parent. It does not currently extend to care for a domestic partner.

To complicate the situation further in California, effective July 1, 2004, many employees will be eligible to receive salary replacement for periods of family leave, under the “paid family leave” statute. There are numerous unresolved issues with the paid family leave statute. However, the paid family leave statute does permit or authorize paid family leave for periods where an employee is needed to care for an ill domestic partner registered with the Secretary of State. Once again, if the same-sex marriages are ultimately found to be legal marriages in California, wage replacement under the paid family leave statute would be available. To our knowledge, as of the time that this article was written, the California Employment Development Department had not issued any public statement whether it regards the recent same-sex marriages as lawful for purposes of the paid family leave statute.

The recent same-sex marriages will further complicate an already extremely complicated set of leave of absence laws. Employers should contact their employment counsel when confronted with a request by an employee to take leave to care for a same-sex spouse.

Protections against marital status and sexual orientation discrimination.
With limited exceptions, discrimination based on marital status is unlawful in California. The term “marital status” refers to persons who are married and unmarried as well as those who are widowed, separated and divorced. One unresolved issue is whether an employer could provide different benefit levels to persons in a same-sex marriage as opposed to those in a traditional marriage.

With the notable exception of health insurance coverage, employers generally may not provide differing levels of benefits to similarly situated employees, solely on the basis of the employees’ marital status.

Employers can, on the other hand, provide different levels or types of benefits to different categories of employees, based on the employee’s seniority or job classification - as long as this decision is not based on the basis of marital status.

While most private-sector employers are permitted to design their employee medical plans as they wish under ERISA, there is a risk that a court may find that treating same-sex spouses differently violates a state anti-discrimination law. Recent federal and California court cases have found that state laws that have only a remote, tenuous and peripheral connection with an employee benefit plan are not preempted by ERISA.

If the same-sex marriages entered into in California are invalid because they are contrary to Family Code section 308.5, an employer could decline to recognize same-sex couples as “married.” We recommend, however, that with the exception of health insurance benefits, employers not provide differing levels of benefits to employees based solely on their marital status (i.e., married, single, divorced, separated or widowed). We do not believe the prohibition on marital status discrimination requires “parity” in health insurance benefits between married and unmarried couples.

It is unlawful for an employer in California to discriminate based on an employee’s sexual orientation or perceived orientation. However, an employer who refuses to provide health insurance benefits to all unmarried couples, including opposite-sex couples, has not violated the prohibition against sexual orientation discrimination. An employer who provides only spousal coverage does not in our view unlawfully discriminate on the basis of sexual orientation. The distinction being made is not between heterosexuals and others, but between married couples and non-married couples.

Of course, as previously stated, an employer may elect to treat a same-sex married couple equally with opposite-sex married couples. However, before offering coverage to same-sex married couples, we recommend the employer consult with its health insurance carrier, HMO or insurance broker to ensure such coverage will in fact be available from the health plan provider.

Retirement plan benefits.
Retirement benefit plans will be affected in at least three ways if same-sex marriages are upheld.

First, tax-qualified pension plans (such as money purchase pension plans and defined benefit pension plans) must offer a qualified joint and survivor annuity and a qualified pre-retirement survivor annuity to participants in the plans and to their surviving spouses (if they were married at least one year prior to the death of the employee). For defined benefit pension plans, the recognition of same-sex spouses may require additional employer contributions to the plan to fund same-sex spouse survivor benefits.

Second, under current tax laws, spousal consent may be required for a retirement plan to pay survivor benefits to persons other than the employee’s spouse. Retirement plan administrators would need to obtain the same consent from the same-sex spouses of the employees.

Third, most retirement plans provide for a distribution of unpaid benefits to specific dependents of a deceased employee if the employee dies without designating a beneficiary. It is not uncommon for the first beneficiary recognized by a retirement plan to be the deceased employee’s surviving spouse.

In some cases, a retirement plan administrator may be forced to decide which beneficiary should receive a distribution of a deceased employee’s retirement benefits: the same-sex spouse (assuming the marriage is valid) or a different beneficiary designated by the plan in the absence of a designation by the employee during his or her life. If faced with this dilemma, the retirement plan administrator may pay the benefits into court, and ask a judge to determine which beneficiary should receive the funds.

Contractors with state agencies.
Another recently enacted California statute, Assembly Bill 17, which will be effective January 1, 2007, will require contractors with California state agencies to provide parity of benefits, including health insurance coverage, as between married couples and registered domestic partners. AB 17 does not address the issue of same-sex marriages. If those marriages are ultimately held invalid, the participants could claim the benefits of this statute only if they became registered domestic partners.

Conclusion.
The issue of same-sex marriage may well be one of the most significant social and cultural issues over the next few years. We do not express any opinion one way or another on the wisdom, morality or propriety of the recent same-sex marriages.

Paid Family Leave (Part 1)

This 2-part article will provide an overview of PFL and call attention to some of the more significant variances between the two state insurance programs.

History
When then-Governor Gray Davis signed SB 1661 into law in 2002, the insurance program was called, “Family Temporary Disability Insurance (FTDI).” In 2003, SB 727 was passed and in addition to making some clarifying changes, the bill also renamed the program “Paid Family Leave.” Unfortunately, the name change is misleading and has caused a great deal of confusion among employers and employees alike, because Paid Family Leave is not a leave entitlement at all. It provides no job protection or reinstatement requirement. It is simply a wage loss replacement program - an insurance benefit, as the former name indicated. Employers are not required by this law to grant leave, or to continue any benefits while the employee is receiving PFL insurance.

Two types of insurance claims
Whereas SDI benefits are for loss of wages due to an employee’s inability to work because of his/her own illness or disability, PFL benefits are for workers who lose wages to: 1) provide care for certain family members who are seriously ill; or 2) bond with a new child.

For the first type of claim, a “serious health condition” is defined the same for PFL as it is under the Family Medical Leave Act (FMLA) and California Family Rights Act (CFRA). The EDD will require medical certification as to the need for care. Employers may not require a copy of the EDD form as it contains protected health information. However, employers may require the usual medical certificate for FMLA/CFRA leave or other leave, per company policy.

The second claim type - bonding with a new child - includes birth, adoption or foster care placement. These events apply to the worker and the worker’s spouse or registered domestic partner (defined by California Family Code Section 297). The child must be under 18 years of age, and the bonding must be completed within one year from the date of the event.

Cost and projected claims
Like SDI, workers pay into the state disability fund through a payroll tax which began on January 1, 2004. The SDI tax was increased by 0.08% for the PFL portion, and the average worker contribution is expected to be around $30 per year through 2005. Thereafter the EDD anticipates a tax increase.

Based on estimates and speculation, the EDD projects a little over 300,000 PFL claims - nearly half of the number of SDI claims - to be filed within the first 12 months of the program, at a cost of about 378 million dollars. These numbers are based in part on the recent federal FMLA survey. Figures that were considered include the number of FMLA leaves taken and the employer-provided benefits available to those workers. It is expected that those who receive partial or no employer-provided benefits will file a PFL claim.

PFL insurance is 100% employee funded. Legislation would be required in order for employers to become responsible for future costs.

See next month’s newsletter for Part 2 and information regarding PFL eligibility, the waiting period, benefits and more.

Drug Testing in California

Employers considering implementing a testing policy and those with a policy already in place should ensure it has been reviewed by their legal counsel with the following concerns in mind.

Pre-employment testing
In 1997, in the case of Loder v. City of Glendale, the Supreme Court of California held that a public employer did not violate the California constitution by requiring all applicants for employment submit to a drug test as part of a more general pre-employment medical examination.

The justice writing the lead opinion reasoned that because the employer has a legitimate and substantial interest in ensuring its workforce is not abusing drugs or alcohol, and because the employer does not have the luxury of observing the individual in the job first to determine whether such a problem exists, and because job applicants who must already submit to a pre-employment medical exam should not consider drug testing to be much more intrusive than the exam itself, a suspicionless drug test of the applicants in question as part of a pre-employment medical exam would pass muster. (Please note the court did not give a blanket approval to all pre-employment drug screens and certainly those not designed to be minimally invasive may be particularly suspect.)

Random testing
Requiring all existing employees, as a condition of promotion, to submit to testing (regardless of whether the employer had a reasonable suspicion the employee was under the influence) was not okay with the court, but because the City of Glendale was a public employer, the issue was decided under the United States Constitution as an illegal Fourth Amendment search (i.e., an analysis that has no relevance for private employers). In other words, the court was silent on the issue of whether private employers would violate California’s constitutional right to privacy by forcing existing employees to submit to random testing.

Regardless, employers would be unwise to require random testing without consulting their legal counsel first. Employees, unlike applicants, can be observed on the job for signs of intoxication and, further, random medical exams of current employees (for which employers could attach a drug screen as minimally invasive extension of the medical exam) are highly irregular and in most cases impermissible.

Reasonable suspicion testing
Narrowing the scope from random testing to testing only those employees who appear to be under the influence certainly bolsters the employer’s legal position, but even a reasonable suspicion testing program is still subject to a balancing test, weighing the employee’s privacy interests against the employer’s justifications for testing.

In Kraslawsky v. Upper Deck Co. (1997), a California state appellate court was careful to point out that an employee’s consent to a reasonable suspicion testing program is merely one factor to use in the balancing test. In other words, even an employee’s consent to a testing program will not shield the employer from a legal challenge, suggesting there may be few, if any, arguments that will remove the employer’s test from scrutiny altogether.

Thus, employers with a reasonable suspicion testing policy should still, at the very least: (1) train supervisors to recognize objective indicators of when someone is under the influence, (2) insure the testing facility utilizes the least invasive means possible, and (3) review with their legal counsel justifications for implementing or maintaining their reasonable suspicion testing program.

Post-accident testing
Post-accident testing is yet another area of uncertainty for employers. There remain no California cases on point to guide employers in understanding potential exposure from a legal perspective. That said, employers should consult their legal counsel.

Miscellaneous
Federal regulations mandate that some employers test employees who work in safety-sensitive positions. Those regulations, a discussion of which is beyond the scope of this article, delineate how and when the employer must send an employee in for testing.

In contrast, some municipal codes limit the scope of permissible testing beyond California’s constitutional constraints and for employees in both the public and private sector. Public employers themselves must also remember their testing policies are governed by Fourth Amendment restrictions as well.

And finally, complications may exist for employers with no-rehire policies impacting former employees who previously tested positive and were fired. Individuals recovering from a substance abuse problem are disabled within the meaning of the Americans with Disabilities Act. In Raytheon v. Hernandez (2003), a disability discrimination case, the U.S. Supreme Court recently found that an individual denied rehire for a positive drug test was not singled out for having a disability because the employee was fired for his conduct; however, the Court left unanswered the question of whether the facially neutral policy would nonetheless violate the ADA because the policy itself had a “disparate impact” on protected individuals.

The EG Consulting Helpline usually receives a number of calls at this time of year regarding company picnics and employer liability. Common questions include: “If an employee is injured, is the injury covered under workers compensation?” and “What’s the liability if the company serves alcohol?”

In addition, sexual harassment, workplace violence and discrimination claims are other areas of concern. Employers who sponsor summer picnics and recreational events must be mindful of the potential problems and legal responsibilities.

To help minimize risk and these types of legal issues, the Employers Group offers the following suggestions:

• Hold the event during non-working hours, and do not conduct company business at the event.
• Do not require attendance; make it voluntary. Be heedful of employees’ rights under Title VII of the Civil Rights Act, which provides that an employer must reasonably accommodate the religious beliefs and practices of an employee, unless doing so would impose an undue hardship.
• Do not coerce or pressure employees in any way to participate in any activities.
• Do not serve liquor. However, if you must serve alcohol:
1. Issue a clear policy statement before the party that drinking to excess, sexual harassment and violence are unacceptable behaviors.
2. Do not serve liquor purchased with company funds.
3. Identify under age employees (and guests) and develop procedures that will prevent them from drinking, such as color-coded wristbands.
4. Limit the number of drinks served to each guest; provide a limited number of drink tickets; hire a professional bartender who will serve measured amounts and cut off individuals who drink too much; designate a time to close the bar, and enforce it.
5. Serve food throughout the event. High protein foods especially help retard alcohol absorption.
6. Ensure that intoxicated guests do not drive; arrange for other transportation such as designated drivers, taxi or limousine service for those who may have had too much to drink.
• Post “Notice to Employees”, California Labor Code Section 3600 regarding off duty recreational, social and athletic activities and provide employees with copies of the company’s written policies regarding these issues.
• Remind supervisors and managers that an injury is covered under workers’ compensation if the injury arises out of and in the course of employment. Therefore injuries sustained by employees who are required, coerced or pressured to attend the company function would likely be covered.

Sacramento Report: Legislative Summary

November ballot
In the fall, the spotlight will be on the November ballot, including the SB 2 referendum and the tort reform initiative, both of which are of extreme importance to the business community. For more information on the campaign to stop SB 2 go to www.stopthehealthtax.org, and for the tort reform initiative, go to www.stopshakedownlawsuits.com.

Pending bills
There are not as many bad bills as in previous years. Many of the pending bills relevant to the business community deal with workers’ comp and unemployment insurance. Most of the remaining workers’ comp bills won’t pass, since lawmakers are done with that this year except for minor clean-up. UI is a big issue for employers because the Fund is insolvent.

Here are 10 other bills of concern for employers this year:

1. AB 1229 (Simitian): Sex Discrimination. Provides that, except in certain specified circumstances, an employer who grants an opportunity or benefit to an employee because that employee submits to the employer’s sexual advances or requests for sexual favors is liable for unlawful sex discrimination against other persons who were qualified for, but denied that employment opportunity or benefit. Federal guidelines already address this issue and could make California employers liable for occasional, consensual relationships in the workplace.

2. AB 1723 (Assembly Labor Committee): Meals and Rest Periods. This bill would provide that employers may not require or permit employees to work during any legally mandated meal or rest period, that employers must provide legally mandated meals and rest periods, that the duty to do so is an independent obligation and employee agreement is unnecessary. The bill also provides that the additional hour of pay an employee may collect in civil action is a wage. This bill would create an unmanageable burden to ensure that employees take mandated rest breaks.

3. AB 1825 (Reyes): Sexual Harassment Training and Education. This bill requires employers with 50 or more employees to provide two hours of sexual harassment training to all supervisors within one year after January 1, 2005 unless the employer has provided such training and education to employees after January 1, 2003. Also provides that new employees be trained within six months of assuming supervisory positions. Severe liability already exists in this area, so this requirement is unnecessary.

4. AB 2317 (Oropeza): Gender Pay Equity. This bill would increase the amount of liquidated damages due to employees who are paid unfairly in violation of existing law and would mandate the types of damages those employees should recover if successful in a civil action against an employer. EG supports the law of gender pay equity, but our Legal Committed believes that courts should continue to have discretion in damage awards, and the existing formula is appropriate.

5. AB 2545 (Koretz): Locking-in Employees. The bill would require (by January 2006), among other things, that exits in a place of employment be located in a readily accessible arrangement, and that every required exit be maintained free of all obstructions or impediments. Because existing health and safety regulations already address this issue, a new law is unnecessary.

6. AB 2889 (Laird): Employment Discrimination. This bill would make employers responsible for the act of non-employees regarding all forms of harassment in the workplace where the employer or its agents or supervisors knew or should have known of the conduct and failed to take immediate and appropriate corrective action. This bill makes employers liable for a very broad range of conduct of non-employees.

7. AB 3021 (Assembly Labor Committee): Payroll Reports. This bill would require employers to include in wage and contribution reports to the Employment Development Department information about the number of individuals the employer employed or hired as independent contractors in California, outside the state, but within the United States, and outside of the United States during each reporting period. It would also require the EDD to report this information to specified legislative committees and post this information on the department’s Web site. California has no regulatory interest in making employers report this information.

8. AB 3037 (Yee): Occupational Safety and Health. As the bill currently reads after amendments, it states the legislative intent to require “high hazard” employers to establish employer/employee committees or liaisons to compliment existing injury and illness protection programs. This bill should not be amended back to earlier versions, since it would then encourage retaliation claims.

9. SB 1841 (Bowen): Electronic Monitoring. This bill would prohibit employers from engaging in electronic monitoring, including computer usage, of employees without first providing notice to the employees, except in certain specified circumstances. There is already existing law requiring such disclosure where employees have a reasonable expectation of privacy.

10. SB 1904 (Florez): Direct Deposit of Wages. This bill would establish requirements that employers must include in an employee’s request for direct deposit and would require an employer who receives such a request to honor it within 30 days. The disclosure obligations are unnecessary and burdensome to employers.

Third Party Sexual Harassment

Because of recent clarifying legislation, the California Court of Appeal, for the Second Appellate District recently reversed itself regarding the issue of non-employee sexual harassment, see - Salazar v. Diversified Paratransit, Inc. (2004). A company client reportedly sexually harassed an employee. The company, according to the opinion, failed to take appropriate action in response to complaints made by the employee.

Diversified Paratransit (the company) transports disabled passengers from their homes to schools and day care centers. Before Raquel Salazar was hired, Rocha (a disruptive passenger) exposed himself to at least three female drivers. They submitted incident reports to the company. Salazar was hired by the company in 1997. Rocha started to bother her on the bus, even during her training period, when she was learning the driving route. Rocha wanted to sit beside Salazar. He would leave his seat touch her hair, and grabbed her purse several times. He stared at her, and said she was bonita - beautiful.

Rocha’s conduct subsequently became worse. Salazar informed her supervisor, and wrote incident reports regarding two separate incidents. On September 2, 1997 Rocha stood up and exposed himself to Salazar, who stopped the bus and put him back in his seat. He attempted to grab her arms. Then, on September 8, 1997, while Salazar was waiting for a passenger, Rocha trapped her in her seat. He exposed himself to her, and touched her all over. He tried to put his hand under her skirt, and held her closely. She screamed for help from fellow drivers. Two male drivers came on to her bus and stopped the attack. Two days later she quit.

Salazar sued the company and her supervisor, for sexual harassment. She claimed they violated California’s Constitution, and Fair Employment and Housing Act (FEHA). She also claimed that she was constructively discharged, and subjected to intentional and negligent infliction of emotional distress.

A lower court jury trial decided the case in favor of the company. The court determined that California’s FEHA did not protect employees from customers or clients. The Court of Appeal supported the lower court ruling.

Within two months of the Court of Appeal’s decision, the California legislature passed, and the Governor approved corrective legislation - AB 76. The new law added language to the FEHA stating: “An employer may also be responsible for the acts of non-employees, with respect to sexual harassment of employees, applicants, or persons providing services pursuant to a contract in the workplace, where the employer, or its agents or supervisors, knows or should have known of the conduct and fails to take immediate and appropriate corrective action. …It is the intent of the Legislature in enacting this act to construe and clarify the meaning and effect of existing law and to reject the interpretation given to the law in Salazar v. Diversified Paratransit, Inc. (2002) ...”

The Appeal Court then concluded that AB 76 is only a clarification of the FEHA, and not a change to the existing law. Therefore, the clarification can apply to the Salazar case.

In a lengthy dissenting opinion Justice Patti S. Kitching noted that: “In 1984, the Legislature rejected a proposed amendment to … the …[law] … which would have made employers like Diversified Paratransit liable for sexual harassment by clients like Rocha. Therefore in 1997, when Rocha sexually harassed Salazar, the law gave no notice to Diversified Paratransit that it could be liable for Rocha’s actions.” She felt that the legislature changed the rules of the game, and applied the new rules to the Salazar case, which had been correctly decided according to the law in effect at the time.

Learn More in Meetings:
How Learning Styles Surface in Unexpected Places

“Do any of you wonder if we could have held this meeting on the telephone or online, without the cost of coming together?” That question was raised near the end of a meeting I recently attended and one I’ve heard in many similar settings when people reflected on the group’s success.

While several of my colleagues quietly gasped, I admitted the question resonated with me. Earlier I had asked myself if this was a good use of our time and if we were learning more together than we could have through other means. Personally, I was thrilled that someone had the courage to speak up because it began to set a precedent for us to voice our individual needs in a setting where we were also trying to serve the larger organization.

For the past 15 years, working in various human-resource roles, I’ve focused my attention on liberating the learner in each of us so that individuals can get better at getting better at whatever they are called to do, personally and professionally. The desire to help others learn has drawn me to facilitate many large groups meetings, coach leaders who are interested in new forms of organization, and write about people-centric approaches to work.

In each setting I help find a balance between the chaos of each person doing precisely what they want to do and the rigidity that comes from everyone doing enough of what other people need them to do. While many people in my situation look at group dynamics first, I focus on individual learning style differences that help people advocate and negotiate for themselves at the most local or personal level.

Although there are many different ways to categorize individual styles, the two types I find most applicable to learning in meeting are motivation styles and direction styles. Once you understand your own style you will begin to notice the style differences of those you work with and serve, and ultimately, you can make learning and meeting with others more efficient, effective, and enjoyable.

Motivation style
Motivation style—that which drew us to want to learn more and work together—appears in almost every meeting and conversation. For some people energy comes from achieving a certain goal and the ability to progress to another level. For others, delight comes because you truly enjoy learning new things. A third group is drawn by the pleasure of meeting other people and building relationships in learning situations. Each of us has a primary motivation style and a secondary preference.

• If you’re Goal-oriented*, you’re likely to reach for your goal through almost any means available. You seek the clearest path, which might lead you directly to your computer or calling an expert in the field. Similar to my collogue, whose question opened this article, the only time an in-person meeting works best for you is when no other means could work as efficiently.
• If you’re Learning-oriented, the practice of learning, itself, drives you. You search for knowledge for its own sake and may become frustrated by anything that requires you to spend more time on procedure and process than on actual learning.
• If you’re Relationship-oriented, you take part in learning mainly for social contact—you meet and interact with people and learn along the way. You may not take pleasure in working independently or focusing on topics alone (separate from the people) because it doesn’t give you the interactivity you crave.

In meetings, one effective way to address different styles is to attend to what people draw from working together. For instance, express to goal-oriented learners that relationship-oriented learners wouldn’t likely participate without some face-to-face time and that you’ll keep meetings as short as practical. Point out learning moments to those with a learning-oriented bend, and remind the relationship-oriented that goal- and learning-oriented people are interested in working together provided the group also helps them meet additional ends.

*Note: Be cautious not to presume that all senior leaders are goal-oriented. I’ve met leaders at all levels with each of these styles.

Direction style
Another style that frequently surfaces in meetings involves the direction you prefer to receive new information. Some people learn in a global way, first seeing the “big picture” and then linking together broad concepts in large leaps. Others learn in a linear fashion, by taking a series of incremental steps toward a goal. Everyone has both global and linear qualities, but some have a distinct preference for one over the other.

• If you’re a Global learner, you may need to understand how what you’re working on relates to you what you know or have experienced before spending time with the details. Sometimes, you may not be able to go on in a conversation when you can’t grasp the point of it all. Once you do, though, you may quickly be able to make new connections and put things together in original ways.
• If you’re a Linear learner, you may know that you don’t need to understand something completely in order to dig in, although you do probably want details and facts as you go. You may prefer step-by-step instructions and find that you absorb materials in small interconnected bits. You’re probably good at solving problems, even when you don’t wholly understanding the topic, if solutions are orderly and easy to follow.

Because these styles can run so counter to one another, in meetings I encourage people to introduce anything new with a glimpse of the bird’s eye perspective. Linear learners typically have the patience to listen and global learners need it to move on. If you help both groups get what they need, you’ll find that there is less positioning that comes from misunderstanding what’s going on.

By appreciating your own style and working to look from other’s perspectives you can help strengthen group dynamics and help everyone learn-no matter if it’s in person, on the telephone, or even online.

Making a Case for Employee Training

Companies need to view training as an important aspect of doing business. If it is considered as a nice perk, like free coffee and doughnuts, it will continue to be on the chopping block every time there is an economic downturn. If training is to survive, it needs to show its worth to the company. How it actually affected the bottom line. Did it reduce turnover? Did it increase sales? Did it bring in new customers?

Studies have shown that companies that spend more than average on training are able to promote employees from within their company, which results in both a reduced cost for recruiting and a reduction in lose of productivity. Another result is the reduction in annual turnover in these companies. Companies that spend $218 per employee on training have an average voluntary turnover rate around 16%, while a company that spends $273 per employee has a rate around 7%.

There are well-defined steps that can be taken to show the bottom-line value of training.

Make sure that all trainings have a connection to a business need.
Many times trainings are put in place without enough forethought. A request by a manager is not sufficient justification to implement a training workshop or program. The request may be valid; however, before a company proceeds, it should understand how that training would help the business and whether it is the best approach to addressing the business need.

Determine that the training has clear objectives and are tied to a business need.

The objectives of training programs should be both observable and measurable. Training program objectives should satisfy all five of these requirements.

• Awareness - familiarity of concepts, terms, ad processes
• Knowledge - a basic understanding of the concepts, procedures, and process
• Performance - demonstration of the basic skills required
• Application - the change that is expected after the training
• Impact - the business need that this training will drive

Calculating the return on investment (ROI).
Calculating ROI is fairly simple. The cost of the training is generally easily determined. Costs should include not only the amount paid for the training, but also the time invested by the people that attended the training (salary and benefits) and the time spent preparing for the training. The benefits that result from the training should be determined in dollars. If this is ignored or poorly determined, the ROI calculation is useless. There are many approaches that can be used to accurately develop this information such as surveys, on the job observations, and production records.

When evaluating the benefits from the training, be aware of other factors that may have been happening at the time. Many times other factors, unrelated to the training occurred, which may have resulted in the improvement. Changes in the company’s compensation program, other training that was conducted at the same time or new management may have been a contributing factor to the results. The use of a control group who did not receive the training is one way to evaluate whether the improvement was due to the training or other factors.

ROI is calculated as the net benefit, divided by the cost, times 100. The net benefit is established by taking the determined benefit from the training and subtracting the total cost of the training. Take this net benefit and divide it by the total cost of the training and multiply by 100. A percentage of 25% and above is considered a good return.

By following this approach to training, companies will continue on a path of improvement in times of economic upturn or downturn. Companies need to value training as part of doing business, but be astute enough to determine which training is in the company’s best interest and which is not. If companies take an analytical approach to training, they will find that the value they receive far outweighs the costs.

Members Offer their Opinion on EG's Services
By Juan Garcia,
Director of Research Services

According to a member opinion survey conducted in January of this year, an overwhelming majority of our members approve of our services: 96% of the members polled rated the services and products provided by Employers Group (EG) as either “Good” (56 percent) or “Excellent” (40 percent).

This survey is one of EG’S main avenues to collect information about its members, including members’ awareness, utilization, and level of satisfaction with its products and services. Conducted annually since 1980, the survey also collects member concerns as well as their opinions regarding EG’s services and products. The following information is based on the results of the survey.

The positive ratings received from our members seems related to EG’s prompt response to member needs (Nearly 3 out of every 4 companies (72 percent) rated EG as “Very Responsive”) and the perceived value of its services (64 percent) rated EG’s services as an “Excellent Value”.

Of the many services and products EG offers its members, one in particular seems to be of high value: Telephone Consulting Services. According to the survey, 90 percent of all members have used this service at least once in the past year -- this service is one of the most utilized by member firms. Additionally, 55 percent of the firms also selected this service as the most valuable service offered by EG. Nearly 76 percent of members are so pleased with this service that they will refer it to their professional peers.

Training Workshops and Briefings - According to the members opinions, some of the most popular services provided by EG that are not subsidized by member dues, are its workshops, seminars and briefings: Nearly 45 percent of the members said that they have attended a briefing or special event and almost one-third have attended a public training program. Nearly 40 percent of the members view this service as “Important” to the needs of their organization.

As you might know, EG has devoted sizeable resources to develop the delivery of its services via the web and HR news. According to our customer survey, our efforts have started to payoff: 71 percent of our members perceived our weekly HR e-mails as “Very Important.” EG’s website also got high marks: 68 percent of members view it as “Important” to their needs.

Employers Group sincerely thanks the 567 participating member firms for their constructive opinions and comments on how to improve Employers Group services. The information they provided will be invaluable as EG continues to look for new ways to serve its members.

For more information about Employers Groups surveys and how to participate, please visit us at www.employersgroup.com/surveys.asp.