LOOSE LIPS SINK SHIPS
(and lawsuits, too)

This old World War II saying has some application in today’s employment litigation world. In cases involving individual claims of discrimination, plaintiff and their counsel are always looking for witnesses who will testify that they were subject to the same kind of discrimination, or that they heard remarks made by persons in responsible positions that allegedly show a discriminatory bias of some kind.

This kind of evidence can be very troubling to employers in the defense of these discrimination cases and often inhibit the employer from being able to defend their actions based upon the truly relevant facts and circumstances of the case. It is clear that managers and supervisors often don’t even realize that the comments that they make can become forceful evidence in litigation.

Issues relating to “me too” evidence and “stray remarks” have recently been considered by the United States Supreme Court, as well as courts within California and across the nation. Comments made by managers or supervisors—even supervisors and managers not responsible for the adverse employment action at issue in the litigation—can have a significant impact on employment cases, even though the employer has a very sound non-discriminatory business reason for taking the action. A person who is fired for incompetence may very well be able to get a full trial and possibly win his or her case, if they can point to past statements made by decision makers that are somehow derogatory on the basis of protected class status.

Often juries grab onto interesting or derogatory remarks and their entire evaluation of the case is tainted by such comments. With the cost of litigation increasing every year, employers need to approach Human Resources matters with a view of first avoiding litigation if possible and secondly, making a good record and establishing policies and practices so that if the employer is sued, the claim can be defended in a way that does not require an actual trial (i.e., on the basis of a Motion for Summary Judgment or some similar motion). Of course, the third goal is to make sure the employer is prepared to fully defend the case if it goes to trial. “Stray remarks” and “me too” evidence can be a significant impediment to meeting these goals.

In February of 2008, the United States Supreme Court issued its opinion in Mendelsohn v. Sprint/United Management (2008). This case involved the trial of an age discrimination case wherein the plaintiff claimed that she had been selected for termination as part of a large reduction in force because of her age.

As part of her case, the plaintiff wanted to introduce testimony from five other former Sprint employees who claimed that they had either been subjected to age discrimination or had heard supervisors make comments about alleged discriminatory practices at Sprint. Further, three of the proposed witnesses claimed that they had heard Sprint supervisors make derogatory remarks with respect to older Sprint employees. None of this “me too” evidence involved supervisors who had had any involvement in the decision to select the plaintiff for lay-off. All of the “me too” evidence involved witnesses and supervisors who were in departments different than the department where the plaintiff worked. None of these witnesses were going to provide evidence directly related to the plaintiff or the plaintiff’s supervisor.

The trial court (U.S. District Court - Kansas) precluded this evidence from the trial. At the conclusion of the trial, the jury reached a verdict in favor of Sprint and the claims were dismissed. The plaintiffs appealed the case to the 10th Circuit of Appeals in Denver, Colorado. The Court of Appeals held that the trial court should have allowed this “me too” evidence to be presented at the trial and ordered that the case be sent back to the District Court in Kansas for a new trial.

The case was then appealed to the United States Supreme Court. The Supreme Court reversed the 10th Circuit of Appeals and vacated the Court of Appeals ruling and sent the case back to the trial court with instructions to the trial court to further articulate the basis for the exclusion of this “me too” evidence.

The Supreme Court Decision, which was written by Justice Thomas, held that there was no per se rule as to the admissibility or inadmissibility of such “me too” evidence. The admissibility is to be determined by the trial court with proper consideration as to the probative value and the potential prejudicial effect of the evidence. The admissibility of “me too” evidence must be considered on a case-by-case basis. In light of the original decision, and the fact that none of the precluded evidence related to the actual decision makers as to the decision to terminate the plaintiff, we expect that the trial court will ultimately rule that the evidence at issue should not have been admitted.

How “me too” evidence can impact employers
While this decision was a win for Sprint, the decision clearly gives a trial court wide discretion as to whether or not to admit “me too” evidence. If such “me too” evidence is admitted, it can lead to a trial within a trial. The employer not only has to defend against the plaintiff’s case but also must put on evidence to refute the “me too” evidence, which in many circumstances will be totally unrelated to the actual merits of the plaintiff’s case. Clearly, the door was left open for the admission of “me too” evidence and plaintiffs will still be looking for “me too” evidence to support their case. We will have to see how the various District Courts and Circuit Courts of Appeals handle “me too” evidence in future cases.

While we believe that in the long run, Sprint will prevail with respect to the admissibility of this “me too” evidence, it is clear that at least some of the issues presented by the “me too” evidence could have been avoided had the supervisors involved not made allegedly inappropriate comments concerning age or about older Sprint employees. Supervisors must realize their comments will be remembered and used by employees.

Possible consequences of supervisors’ “loose lips”
“Stray remarks” also can cause difficulty for employers in defending discrimination cases. A “stray remark” is a remark that may be derogatory or show some type of bias that in and of itself is not sufficient to support an inference of discrimination. Unlike “me too” evidence, stray remarks are often attributed to the person responsible for taking the employment action at issue in the case, or at least attributable to someone close to the decision maker so as to have some impact on the decision. To determine whether a remark is a “stray remark,” the following factors are usually considered:

1. Who made the remark?
   
2. When was it made in relationship to the employment decision?
   
3. The content of the remark.
   
4. The context of the remark.
   

The United States Supreme Court in Reeves v. Sanderson Plumbing, 133 (2000) addressed the “stray remark” issue. In Sanderson (an employment discrimination case), the plaintiff claimed that his supervisor had made statements such as “he was so old he must have come over on the Mayflower” and that plaintiff was “too old to do the job.” That supervisor later was part of the decision process that ultimately led to the termination of the plaintiff. The plaintiff used the statements of his supervisor as evidence to support the claim that age bias played a part in the decision to terminate.

The case ultimately got to the United States Supreme Court and one of the issues before the court was whether or not it was appropriate to allow Sanderson to submit his supervisor’s comments as evidence to support his claim. The United States Supreme Court held that these remarks made by the supervisor, who participated in the decision to terminate the plaintiff, demonstrated an age bias motivation, even though the statements were not made as part of the challenged employment decision, and they were admissible and could be considered by a jury when deciding discriminatory motivation. There was no need for the supervisor to make the statements and making these statements had a significant impact on the jury decision.

Determining when “stray remarks” are detrimental
It is also difficult to determine exactly when a remark will be considered a “stray remark,” and when the remark will be considered admissible evidence to demonstrate discriminatory bias.

In Silver v. American Institute of Certified Public Accountants, 212 Fed., approx. 82 (3rd Circuit, 2006), the Court of Appeal ruled that supervisor’s comments to the effect that “when black women get fat their husbands stay with them, but when white women get fat their husbands leave them” was a stray remark. The court concluded that the statement was not made at the time close to the employment decision at issue and that there was no evidence that there was a causal connection to the decision process. It was also important to note that there was significant evidence as to the non-discriminatory reasons for the decision to terminate the employee. While this Court did find the statement to the supervisor to be “stray remarks,” we are not sure that these facts would result in the same decision in other jurisdictions, especially California. Again, why were such remarks made in the first place?

There is also the question as to whether the remark in question is in fact evidence of bias. In Ash v. Tyson Foods, Inc., 546 U.S. 454 (2006), the United States Supreme Court held that the use of the word “boy” alone without any other reference to race or national origin could be evidence of racial animus, depending upon the context, local customs, or historical usage. Comments by managers, such as “I want racehorses, not plow horses,” or that the employee’s sales approach was old school, have been treated as admissible evidence of loss.

The recent California Court of Appeal decision in Reid v. Google, demonstrates that California Courts will be very hesitant to preclude evidence as stray remarks. In Reid, the plaintiff claimed that he was demoted and eventually terminated because of his age. He was replaced by an individual 20 years his junior. Prior to being fired, the plaintiff was called “fuzzy,” “sluggish” and told his ideas were “obsolete” and “too old to matter”. Co-workers called him the “old man” and a fuddy-duddy. The trial court granted the defendant’s Motion for Summary Judgment and dismissed the case. In so doing, the Court ruled that these statements and remarks were not sufficient to raise a triable issue of fact as to the issue of age discrimination. In reversing the trial court ruling, the Court of Appeals stated:

“We do not agree with suggestions that a ‘single, isolated discriminatory comment’ (Gagne v. Northwestern Nat. Ins. Co. (6th Cir. 1989) 881 F.2d 309, 314-316), or comments that are ‘unrelated to the decisional process’ are ‘stray’ and therefore, insufficient to avoid summary judgment. There are certainly cases that in the context of the evidence as a whole, the remarks at issue provide such weak evidence that a verdict resting on them cannot be sustained. But such judgments must be made on a case-by-case basis in light of the entire record, and on summary judgment the sole question is whether they support an inference that the employer’s action was motivated by discriminatory animus. Their ‘weight’ as evidence cannot enter into the question.”

This ruling almost categorically rejects the entire “stray remark” rule and allows almost any type of remarks that can be interpreted as demonstrating some kind of bias to be admitted to support a plaintiff’s claim of discrimination–no matter who says it or in what context the statement was made.

Clearly, derogatory comments (offensive or otherwise) can cost employers significant money simply in terms of the cost of defense, let alone in costs from judgments and attorneys’ fees for plaintiff’s counsel. Such comments will either lead to litigation or will prevent litigation, from being successfully resolved at an early stage, which would save the company money.

Keeping the ship afloat
What should an employer do to avoid the problems created by “me too” evidence and inappropriate comments to make sure that employment decisions that have been made on the basis of sound non-discriminatory business reasons are not undercut by irrelevant and often offhanded comments. It shouldn’t be too hard for employers to avoid these issues.

First, and most obvious, is to eliminate (if not at least drastically reduce) such comments. Managers and supervisors must be trained to be sensitive to the issue and not to make such statements. They must realize that such comments, while often made in jest, or at least made without any real animus, can and will be used by employees if the employee is later subjected to an adverse employment action. Comments and jokes about race, age, sex, sexual orientation and disability or any other protected category are simply unacceptable. Managers must realize that we are not only talking about offensive comments, but we are also talking about comments that can be construed in a negative manner with respect to a protected category. The rule against such comments, jokes, etc., needs to be applicable to all employees, not just management.

If and when inappropriate comments are made, management must quickly respond with some form of corrective action. Such a response, even to comments made by non-management co-workers, may seem like nit-picking at times, but remember even one inappropriate comment can taint an otherwise appropriate decision. When corrective action is taken at the time such comments are made, it is more likely that the court will not consider the comment to be evidence of bias by the employer and allow the comment admitted into evidence.

Also, if an employer becomes aware of a supervisor making inappropriate comments, that supervisor should be removed from any decision making process relating to the employee or employees in question. A supervisor can’t claim someone is too old to do the job, and then effectively testify that the employee was fired for a non-discriminatory reason.

Addressing these issues may not totally avoid employment litigation, but at least it will go a long way to facilitate an easier and less costly defense. If employers do not have to deal with extraneous inappropriate comments, the outcome of any litigation will more likely be based on the relevant facts rather than some irrelevant comment that in reality had no impact and played no role in the decision making process. Remember, these comments can deliver acorns from which big oaks can grow.

If It Quacks Like a Duck, It Probably is a Duck
Correctly classifying independent contractors

If the business pays $600 or more in payments to an independent contractor, the business must file a Form 1099-Misc with the IRS and a Report of Independent Contractor(s) (DE 542) with the EDD within 20 days of either making payments totaling $600 or more, or entering into a contract for $600 or more with an independent contractor in any calendar year. The IRS contends that 60 to 70 percent of all independent contractors don’t pay their taxes, costing the federal government up to $4 billion annually in lost revenue.

Increased IRS Audits
The IRS has joined with more than two dozen states to collectively work together to crack down on employment tax violations. Among the key issues is whether a worker should be classified as an employee or an “independent contractor.” The difference in classification has a significant tax implication for both businesses and workers. The IRS recently signed information-sharing agreements with state labor or workforce agencies in 29 states, including California. As federal and state agencies work hand in hand, businesses are going to be held to a higher standard.

Could you face an audit by the IRS? Every year, there has been a significant increase in audits for large corporations, S Corporations and partnerships. In 2007, a total of 59,516 businesses were audited, which was an increase of almost 14% from the previous year. So don’t be surprised if you get audited. Make sure that you do not take the compliance check too lightly. This is the biggest mistake business owners make.

The 20 Factors
To determine if a worker is an independent contractor or an employee, the IRS has a guideline called the 20 Factors (Revenue Ruling 87-41). A quick rule of thumb is: anyone who performs a service for you is your employee “if you can control what will be done and how it will be done.”

The IRS’s 20 Factors are as follows:

1. Instructions — an employee must comply with instructions about when, where and how to work. Independent contractors are free to do the work their own way, or using methods they choose.
   
   
2. Training — independent contractors do not need to be trained on the services they provide. If they do, it is an indication that this worker is an employee.
   
   
3. Integration — an employee’s services are integrated into the business operations because the services are important to the business. An independent contractor’s services are not part of the regular trade or business.
   
   
4. Services Rendered Personally — if the services are to be rendered personally, presumably the employer is interested in the methods used to accomplish the work. An independent contractor may assign the work to others.
   
   
5. Hiring, Supervising and Paying Assistants — if an employer hires, supervises and pays assistants, the worker is generally categorized as an employee. An independent contractor hires, supervises and pays assistants under a contract that requires him or her to provide materials and labor and to be responsible only for the result.
   
   
6. Continuing Relationship — a continuing relationship between the worker and employer indicates that an employer-employee relationship exists.
   
   
7. Set Hours of Work — a worker has set hours of work established by the employer. An independent contractor sets his/her own schedule.
   
   
8. Full-time Required — an employee normally works full time for an employer. An independent contractor is free to work when and for whom he or she chooses.
   
   
9. Work Done on Premises — work performed on the premises of the employer suggests employer control. Independent contractors may perform the work wherever they desire as long as the contract requirements are performed.
   
   
10. Order or Sequence Set — a worker who must perform services in a sequence set by the employer is generally an employee. Independent contractors perform the work in whatever order they choose.
    
    
11. Oral or Written Agreements — a requirement that the worker submit regular oral or written reports to the employer indicates some level of control by the employer.
    
    
12. Payment by Hour, Week or Month — payment by the hour, week, or month generally points to an employer-employee relationship. Payment by the job generally indicates the worker is an independent contractor.
    
    
13. Payments of Expenses — if the employer ordinarily pays the worker’s business or travel expenses, the worker is generally an employee.
    
    
14. Furnishing Tools and Materials — if the employer furnishes significant tools, materials and other equipment, the worker is generally an employee.
    
    
15. Significant Investment — if the worker invests in facilities that are used by the worker in performing services and are not typically maintained by employees, that factor tends to indicate that the worker is an independent contractor.
    
    
16. Realization of Profit or Loss — any worker who can realize a profit or suffer a loss as a result of the worker’s services is generally an independent contractor, but the worker who cannot is an employee.
17. Working for More than One Firm at a Time — if a worker performs services for a multiple of unrelated firms at the same time, the worker may be an independent contractor.
    
    
18. Availability to Public — if a worker regularly makes services available to the general public, this supports an independent contractor determination.
    
    
19. Right to Discharge — the employer’s right to discharge a worker indicates that the worker is an employee. To discharge an independent contractor generally depends on contract terms.
    
    
20. Right of Termination — if the worker can quit work at anytime without incurring liability, the worker is generally an employee.
    

If you are still unsure whether the worker is an independent contractor or an employee, you may contact the Taxpayer Education and Assistance (TEA) for consultation and advice by calling (888) 745-3886, or request a written ruling by completing a Determination of Employment Work Status, DE 1870. The DE 1870 is designed to analyze a working relationship in detail and serves as the basis for a written determination from EDD on employment status. You may also call the Employers Group Helpline to discuss your situation with one of our consultants.

President Bush Widens E-Verify to Affect Federal Contractors

On Monday, June 9, 2008, in a new effort to keep illegal immigrants out of the workforce, the Bush administration ordered all companies doing business with the federal government to start verifying that their employees can legally work in the U.S.

The Executive Order 12989, as amended, will require thousands of firms to use a government system called E-Verify to check workers’ Social Security numbers. The system has been voluntary for private firms, but mandatory for government agencies. The program, which initially applies to new hires, ultimately could affect millions of federal contract employees nationwide whose jobs vary from serving cafeteria food to launching NASA spacecraft.

The new E-Verify program
The program was originally established in 1997 as the Basic Pilot/Employment Eligibility Verification Program, along with two other programs created to prevent illegal aliens from getting jobs. The other programs were discontinued, but E-Verify has grown to a total of 2.9 million requests by 69,000 companies in 2007, with about 1,000 firms signing up weekly for the free Internet-based system.

E-Verify allows participating employers to electronically compare employee information taken from the Form I-9 (the paper-based employee eligibility verification form used for all new hires) against more than 425 million records in the Social Security Administration’s (SSA) database and more than 60 million records in the Department of Homeland Security (DHS) immigration database. Results are returned within seconds.

Critics are vocal - with reason
The system, however, has been criticized by business groups and immigrant advocates because errors in the Social Security database can lead to red-flagging legal residents. In 2006, for example, the Social Security Inspector General found discrepancies in 17.8 million records for citizens and legal immigrants that would create a “significant workload” to correct. Some critics warned that forcing the more than 200,000 federal contractors to join E-Verify could overwhelm the Social Security Administration and create chaos for legal workers. Moreover, the inaccuracies in the database could increase costs and cause delays in hiring. Lastly, the system could not detect applicants who used documents stolen from legal workers, setting off more identity thefts by illegal immigrants.

The pluses of the program
Conversely, E-Verify is constantly enhancing and improving its access to real-time data by including more of the DHS database in its system with the primary goal of driving down the mismatch rate. For example, E-Verify’s new photo screening tool is a biometric verification within the E-Verify system. This additional feature gives employers the tools they need to detect identify theft in the employment eligibility process.

One question is paramount for federal contractors
Are federal contractors required by the Executive Order or the proposed rule to enroll in E-Verify now?

Not yet. At the present time, the E-Verify program remains a voluntary program for employers, including federal contractors. The Executive Order instructs federal agencies to require contractor participation in E-Verify as a term of future contracts, and the proposed rule provides detailed guidance on how that requirement is to be implemented.

Proposed rule not final, but should be followed
The proposed rule is not a final rule yet; it is a proposal that is open for public comment at this time. There may be changes to the rule before it becomes final. Moreover, the final rule will not be effective until 30 days after publication.
Under the proposed rule, a federal contractor would only be required to enroll in E-Verify if it enters into a federal contract or subcontract that requires participation in E-Verify “as a term of the contract.” Although federal contractors are not yet required to participate in E-Verify, a federal contractor should consider enrolling in E-Verify now to verify the employment eligibility of new hires.

It is critical for all employers, including federal contractors, to recognize that staff that uses E-Verify must be thoroughly trained in appropriate E-Verify procedures and policies. The failure to use the program properly may lead to liability for the company, including back wages for employees who have been subject to adverse action, and expulsion from the program.

Notify applicants
All employers using E-Verify must also notify applicants of their use of the program. As an employer participating in E-Verify, you are required to post the notice provided by DHS indicating your company’s participation in the E-Verify program, as well as the antidiscrimination notice issued by the Office of Special Counsel for Immigration-Related Unfair Employment Practices at the Department of Justice. The posting must take place in an area where it can be viewed by applicants and new hires.

For more information, please contact Ahmed Younies, Employers Group’s Director of Specialty Services, at 213.765.3942 or ayounies@employersgroup.com.

By Ahmed Younies,
Director of Specialty Services

A Primer on Unemployment Insurance Tax
Understanding the process

The Unemployment Insurance program in California, and most other states, is completely funded through taxes paid by employers. Yet many employers do not understand how the tax rate is computed and how even one claim can cause the rate to increase.

Perhaps the easiest way to explain it is to put it in more personal terms. If choosing to implement the experience rating method, each employer has to establish a “reserve account.” Think of this as similar to an individual savings account except the “contributions” to this account are not based on what you want to deposit but on what the Employment Development Department (EDD) tells you to deposit each pay period.

Figuring out your contribution
The amount of the contribution is based on the tax rate, which appears on the Notice of Contribution Rates and Statement of UI Reserve Account, more simply called the Tax Rate Notice. This notice is sent towards the end of a year, usually December, for implementation with the first pay period in January of the new year.

The assigned tax rate is paid on the first $7,000.00 of each employee’s wages. The tax rate is based on various factors that appear on the notice beginning with the starting balance—which is actually the ending balance from the previous year. Added to that amount are all contributions paid into the reserve account (savings account) during the previous fiscal year, and other credits, resulting in a subtotal. From the subtotal are subtracted all UI benefits paid former employees out of the reserve account.

There are other charges assessed to the employer that appear in the tax rate section of the notice. One of the additional charges is used to pay employees of employers who have negative reserve balances. All the charges are subtracted from the subtotal resulting in the new ending balance. This balance is divided by the average UI taxable payroll (the first $7,000.00 of each employee’s wages) from the three years prior to the year the notice is prepared. For example, payroll from 2004, 2005 and 2006 was used to compute the rate for 2008. The division process yields a ratio number that is run against the tax schedule. The corresponding line is the tax rate applied to the UI account.

Following the formula
The formula is set to link contributions and charges to the reserve account. In theory, the smaller the amount of charges, the lower the tax rate. Of course, the opposite is also true. One dollar ($1.00) of one claim can be enough to send the tax rate to the next level. Again, apply the principle on a personal level. A raise that nets $20.00 in the paycheck may cost hundreds in income tax because it puts the recipient in the next tax bracket.

Rates in the tax schedule increase in increments of 0.1% or 0.2%. Each increase of 0.1% equals $7.00 in additional UI tax paid on each employee. A stable workforce of 100 employees would result in additional annual tax of $700.00. Any turnover would cause the amount of taxes to be paid to increase proportionately.

That is why it is extremely important to monitor account activity, to protest claims when the employee does not meet eligibility requirements for UI benefits, to audit charge statements for inappropriate charges to the reserve account, and respond to promptly to all communication from EDD.

Guidelines for Layoffs

As busy human resource professionals, we can sometimes lose sight of the “human aspect” of our job. How could it be? After all, the word “human” is right in our title. Yet, it is not surprising given that we are so busy drowning in issues regarding compliance and regulations. However, to be outstanding HR professionals, we need now, more than ever, to take a step back and remember the human element of our jobs, especially as layoffs and reductions loom.

As you can imagine, losing a job is by far one of the most emotionally and financially devastating events a person can experience. For most people, their job is what defines them. After all, more than one-half of our waking hours are spent at our workplace. To take that away, whether by layoff, downsizing or reduction in force, the fact remains the same: they are without a job. The ball is in your court. You as the HR professional will have the ability to make the difference. As daunting as it may seem, you can do it successfully, if you have the right mind-set and a plan.

Have a plan. Before the need for a layoff occurs, if possible, prepare and adopt a written layoff policy. Once you have a policy, this will be the manifesto if layoffs are to occur. Objectives will be clear and procedures will be defined for all your employees to read. In your policy, be sure to cover the following topics:

• Who will be the decision makers in the event of a layoff.
• What they can expect to occur in the process.
• When will the layoff be communicated to employees?
• Why a layoff may be necessary.
• How employees will be chosen for layoff.

Also be prepared to lay out information on severance packages and employees benefits, if available.

Preventative measures
Before moving forward with a layoff, take a look at layoff alternatives. Thinking outside the box, asking for suggestions and networking with other HR professionals are just a few ways to discover new and innovative ideas to prevent, or at least hold off, a layoff from occurring.

• Salary reductions - starting from top to down
• Eliminating or restricting overtime
• Hiring freeze
• Job sharing
• Alternative work schedules
• Unpaid/partial pay leaves, including sabbaticals
• Mandatory vacations
• Early retirement incentive programs

A great resource, often under used, is California’s Employment Development Department. Their website is http://www.edd.ca.gov. With trained and knowledgeable consultants, they can provide tremendous assistance to both employers and employees transitioning through downsizing. All services are free of charge.

One alternative to layoffs is the Work Share program. Work Share is an EDD program that allows the payment of a prorated percentage of UI benefits to workers whose hours and wages are reduced. When business conditions improve, you can quickly gear up without the expense of recruiting, hiring, and training new employees. In turn, your employees are spared the hardship of full unemployment.

Notice
Generally speaking, if you have more than 75 employees, full- or part-time, that have been employed with you for at least six of the 12 preceding months; and your company is planning to close a plant and lay off or relocate 50 or more employees, your company most likely has obligations to comply with the notice requirements of the California Workers Adjustment and Retraining Notification Act. (See June 2008 article: Layoff and Plant Closure Requirements.) However, regardless of whether you are a covered employer who mandates notification, it is always in the best interest of any company to provide notice as soon as possible.

Low morale and reduced productivity are inevitable in any layoff. The benefits, if any, of delayed notification are outweighed by the enormous benefits of informing your employees. This not only empowers your employees to prepare themselves both mentally and physically for what is ahead, but also places in the company a position of honesty and transparency.

Communicate
One of the most important aspects of a layoff is communication. For an employee, the unknown is far worst than the truth. When there is uncertainty in the air, employees will respond by creating their own ideas. It is in the silence that trouble begins. As such, develop a plan of communication. Clearly state why the decision was made and how it is a hardship for the entire company. Highlight methods that have been tried to avoid the layoff and most importantly, reiterate your commitment to your employees.

Train management
All management must be trained in your layoff procedures. Consistent responses must be provided across the board. Make sure no promises are made. Management must show a united front. Exit interviews are breeding grounds for lawsuits. Ensure management provides consistent answers to all employees. Provide a sample script of what will be said. Have answers provided to management for all conceivable questions employees may have.

In the months before and following a layoff, ensure senior management is visible and accessible. Choose a spokesperson to be the face of the company. The spokesperson selected should be prepared to respectfully respond clearly to an array of emotions and questions. Adhering to open and transparent communication will deter misinformation and help you control occurrences such as the relentless rumor mill.

Smooth transition
Employees will want to know who will be assuming additional responsibilities, and now that there are post-layoff procedural gaps , how the accountability structure will look. Immediately acknowledge that the entire company has experienced a difficult event. Give employees, including management, time to grieve their losses. Get employees geared up to focus on a new goal by outlining a road map rendering realistic objectives. The more you used the open-book management techniques, the more the survivors will be willing to commit and strive toward achieving goals.

In the end, after looking at all the alternatives and creating an action plan, a layoff may still be the only solution. If that is the case, make sure each and every layoff is dignified. Employees will not remember what was said, only how it was said, and how they felt after you said it. With open communication and respect, there is a light at the end of the tunnel.

By Amy Lee,
Senior Consultant

A Tricky FMLA/CFRA Question

How does reduced or intermittent leave taken under the federal Family Medical Leave Act (FMLA) or the California Family Rights Act (CFRA) affect an exempt employee’s fixed salary?

Under both federal and California law, an exempt employee must receive their “fixed salary” for any workweek (a continuing 7-day period) in which they perform any work without regard to the quality or quantity of work performed.

This “salary basis” requirement often confuses employers when addressing how to pay exempt individuals who are on intermittent or reduced FMLA/CFRA leave. Under FMLA, the answer is clear—the employer is allowed to deduct for any hours missed due to intermittent or reduced leave that is qualified as FMLA leave.

Under CFRA, the answer is less than clear—the CFRA does not contain any pay deduc-tion allowance. However, the employer may pay according to one of two options and “be safe” under both federal and California regulations.

Option (1)
Change the exemption status to nonexempt for the duration of the FMLA/CFRA leave and pay the employee on an hourly basis. Remember, if this option is chosen, then all nonexempt requirements apply such as overtime, meal and rest periods, etc.

Option (2)
Keep the exempt status unchanged, but negotiate a new “fixed salary” that will remain in force until the leave is finished, at which time the salary can be re-negotiated back to the original fixed amount. Remember, if this option is chosen, then the new fixed salary does not fluctuate according to hours worked except for those exceptions that both federal and state law allow under existing “salary basis” regulations.

Allowable full-day deductions under existing “salary basis” regulations (federal and state)
Where an exempt employee misses a whole day for personal reasons and has no personal time available, the employer may deduct a full day’s wage and not lose the exemption for that employee. Similarly, if the employer has a bona fide sick pay plan (not defined in regulations) and the employee has no sick time available, then when the employee is absent for a full day due to sickness, the employer may deduct a full day’s wage and still keep the exemption.

Allowable leave bank charges for partial days missed under existing “salary basis” regulations (federal and state)
Where an exempt employee misses a partial day due to personal reasons or sickness, no deductions from pay are allowed. However, if there are hours available in a sick leave or vacation account, the employer may charge the hours missed to that account. Some attorneys argue that the leave account can only be charged where 4 or more hours are missed. Other attorneys argue that the leave account may be charged for as little as one hour.

Where the leave account is empty, no “charge off” is allowed and the employee must receive the whole day’s wage. In the latter situation, some companies put the exempt employee in a negative account. However, in this situation, if the exempt employee terminates before the leave time is earned back, no deduction is allowed from final pay.

Forcing the use of paid leave
Generally either the employer or the employee may force the use of paid sick, vacation, or personal leave during FMLA or CFRA. There are, however, exceptions. FMLA allows the employer to force the use of paid leave only when the FMLA leave is unpaid.

If the employee receives benefits under California’s State Disability Insurance (SDI) program or under California’s Paid Family Leave (PFL) insurance program, the leave is considered paid and the employer cannot force the use of any company paid leave account during FMLA leave.
Another exception deals with California’s Pregnancy Disability Leave (PDL) mandate. Under PDL, the use of vacation leave is always at the woman’s discretion, it cannot be forced. Lastly, no paid leave should be forced upon an employee during workers’ compensation leave.

EG Launches ServiceOne

In our ongoing effort to streamline and enhance your member experience, we are pleased to announce the launch of ServiceOne, our enhanced member service center. Our ServiceOne team of associates provides you with direct access to all your member services with one phone call.

“Our members are busy HR executives who need easy access to their EG services. I don’t want our members to have to seek out individual EG service line representatives to get their various needs met. Our new ServiceOne approach now allows our members to get exactly what they need, handled immediately, in one phone call,” said Mark Wilbur, CEO.

You can now call into our 800-748-8484 phone number and your call will be answered live by an EG associate who can help you with all your service needs. If you have a Helpline or library request, you will be immediately transferred to the first available consultant.

Any other member services requests will be handled live:

• Register for an upcoming training course or EG special event
• Order surveys, posters, books or other products
• Renew your membership
• Update your member profile

If you have a straightforward request for an EG training or consulting service, our ServiceOne team will promptly develop a proposal and will submit it to you for your review and approval.

It is our expectation that the majority of your service needs will be addressed through a single phone call. That said, however, ServiceOne is not intended to limit your access to any of the EG consultants you’re accustomed to dealing with directly. If you wish to speak with your regional service manager, the training department, our research team or specialty consulting, ServiceOne will route your call immediately.

And, our regional service managers will still be available to address your day-to-day human resources needs and requirements. As a reminder, these offices are located in Northern California, Woodland Hills, Los Angeles, Orange County, the Inland Empire, and San Diego.

We remain committed to providing you with excellent customer service. Please feel free to contact me directly with any comments or suggestions for how we can continue to improve our services and member benefits. Simply email me at ktiratira@employersgroup.com.

Work-Related Injury No Bar to Valid Termination

An employee claimed a work-related injury for the first time at the same time the company was conducting an investigation for missing cash. He said he was suffering from pain and numbness in his arms, fingers, shoulders, and feet; and had been experiencing those symptoms for a year or two. He filed a workers’ compensation claim. Shortly thereafter, as a result of the work performance investigation, he was terminated.

Was the employer guilty of discrimination against the employee since the employer fired the employee so soon after he advised it of his injury? In this case, the answer is no. The California Court of Appeal determined there was no discrimination since the employer had a legitimate, non prohibited reason for terminating the employee, see - Arteaga v, Brink’s, Incorporated (2008).

In August 1999, Carlos Arteaga went to work for Brink’s as an armored vehicle driver at its Los Angeles branch. Later, he became a guard and eventually a messenger.

The messenger is a very important job. He provides supervision over the vehicle and its crew. He is responsible for making the actual deliveries and pick-ups at customer locations. He controls all valuables placed in the armored vehicle, including significant amounts of money. He is responsible for removing deposits and residual cash from ATMs and replenishing the cash in the machines. He controls the safe delivery of the residual cash and deposits to the Brink’s vault.

In order to maintain his driver certification with Brink’s, Arteaga had a medical examination in August 2003. The examination report showed that he was in good health. He completed part of the report himself, and indicated he didn’t have any illnesses or health problems.

In 2004 Brink’s started an investigation regarding missing funds on pickups where Arteaga was the messenger. During the investigation, Arteaga informed Brink’s for the first time that he was feeling a combination of “pain” and “numbness” in his arms, fingers, shoulders, and feet. He also disclosed for the first time that he was undergoing “a lot of stress.” He claimed that he was unable to move and bend his fingers. He said he never reported the symptoms because he thought the pain was going away, but it didn’t. According to the case, Arteaga never displayed any signs of his medical problems at work. Nor did his supervisors ever see him suffering from any medical condition.

In a meeting with his supervisor on March 23, 2004, Arteaga was terminated. His letter of termination stated: “After several weeks of research and investigation, it has been determined that since October 2003, there have been several shortages totaling $7,668.00 from ATM Machines that you serviced as a Messenger. In each case it was determined that you were the only person to service the ATM Machine. While no one is accusing anyone of theft, the money was assigned to you and therefore your responsibility. … On the basis of your overall performance while employed by Brink’s, the management of Brink’s has lost confidence in your ability to perform your duties at the standard required of a Brink’s Business Partner. As a result of this loss of confidence the decision has been made to terminate you[r] employment effective immediately.”

According to the court, sometime later Arteaga was diagnosed with carpal tunnel syndrome. This condition limited him in only one respect: He could no longer play soccer. He still suffered from pain in his arms and shoulders, as well as numbness in his fingers and arms. He received chiropractic treatment.

In late 2004, Arteaga brought suit against Brink’s, and two supervisors. He claimed that his injury qualified as a disability under the California Fair Employment and Housing Act (FEHA). He asserted that Brink’s engaged in acts of discrimination, harassment, and retaliation by “(1) failing to determine how to accommodate him, (2) failing to engage in a good-faith interactive process to determine effective reasonable accommodations, (3) failing to move him into another position, and (4) terminating him.” Additionally, he claimed he was wrongfully terminated in violation of public policy, alleging disability discrimination and retaliation for filing a workers’ compensation claim, which is a right protected under California law.

Brink’s sought summary judgment claiming: “(1) Arteaga was not physically disabled and could not establish a prima facie case of disability discrimination; (2) Brink’s had a legitimate, nondiscriminatory and nonretaliatory reason for discharging him; and (3) the individual defendants could not be held liable under the FEHA or on a claim for wrongful termination of employment in violation of public policy. Arteaga filed opposition.” The lower court agreed with Brink’s and granted its motion. Arteaga appealed the decision.

The Appeals court ruled against Arteaga when it concluded that “Arteaga was not disabled given that his symptoms did not make it difficult for him to achieve the life activity of working. … Brink’s terminated Arteaga’s employment for a legitimate, nondiscriminatory reason: Management lost confidence in him. The closeness in time between Arteaga’s disclosure of his symptoms and his subsequent termination does not create a triable issue as to pretext, especially because his performance had been questioned before he disclosed his symptoms, and he was eventually terminated for those performance issues.

“…To the extent that the wrongful termination claim alleged retaliation for filing workers’ compensation claims, it, too, fails because of the same legitimate reason for the discharge. Although Arteaga was terminated within days of filing his workers’ compensation claims, such that the close proximity in time supports a prima facie case of retaliation, temporal proximity alone is not sufficient to create a triable issue as to pretext, particularly in light of Brink’s statistical showing that the company does not discharge employees for filing workers’ compensation claims.”
Note: an employer, when faced with facts similar to those found in this case, should determine whether or not the employee would have been terminated even if no workers’ compensation injury were claimed. In other words, make sure the work-related injury had no impact on the decision to terminate the employee.

Employer Alert: Violence in the Workplace can Cost You!

Editor’s Note: This is one of occasional articles that we consider timely and of special interest to our members.

In the last two years, violent episodes have erupted across the country, making national and international headlines. We watched in disbelief as students at Virginia Tech tried to cope and make sense of the massacre unleashed on their campus which left 33 people dead and many others critically wounded. The physical and emotional scars from what is considered to be the deadliest shooting rampage in U.S. history will not be easily transcended.

Across the country in Santa Cruz, California, a sanitation employee walked into his workplace, shot his supervisor and estranged wife before he turned the gun on himself. In the wake of these events, those who are involved are left asking, “How did this happen, and why.” As a former Secret Service Agent, Ron Williams has investigated threats against several U.S. Presidents, along with responding to numerous calls of escalating violence in the workplace since he founded his company, Talon, 13 years ago. He says, “Identifying stages of behavior, types of acts of violence as well as intervention techniques are critical to preventing violent episodes from erupting, causing significant damage and sometimes loss of life.”

In the wake of an incident of workplace violence, a common thread emerges; the warning signs were there, but nobody was paying attention or the warning signs were dismissed as harmless acting-out (see Franklin v. The Monadnock Company). A year and a half before the shooter unleashed his wrath on the campus of Virginia Tech, a professor was so concerned about his anger that she reported his behavior to the police and took him out of a creative writing class to teach him one-on-one. Warnings were given, but little action was taken.

In a recent case, the plaintiff sued for wrongful termination in violation of public policy. This lawsuit was based on numerous complaints made to the company’s Human Resources Department saying a fellow co-worker was threatening to have him and three other colleagues killed. The company failed to take action and a week later, the co-worker in question attempted to stab the plaintiff with a metal screw driver along with another unidentified weapon. This employee continued to make complaints to the company and even to the local police. Instead of taking action against the alleged aggressor who was accused of making threats and actual attempts on his life, the company terminated the employee.

The court sided with the employee stating, “It’s an employer’s legal responsibility to provide a safe place of employment and requires them to address credible threats of violence in the workplace.”

The court decided the perceptions of the employee who was threatened mattered, and not the opinion of the company’s supervisors, Human Resources Department or management. This case is a reminder of the responsibility employers have to address allegations of potential violence and the mandate to maintain a safe and crime-free workplace.

Evaluating Trainers

Will your company be contracting with an external training provider to deliver training on-site at your facility? If so, then understanding some basic trainer evaluation techniques will be of great value to you. Trainer evaluation is a key part of a training program and correlates directly to your return on investment. Trainer evaluation unfortunately is often an unstructured and haphazard process.

Evaluating an instructor should be done at three points: Prior to delivery, during delivery and after delivery. Of course, the most important of these is prior to delivery, which is covered here.

Before going any further, it is important to make some generalizations about different types of trainers:

• Trainers – a learned authority or subject matter expert that tries to impart some of their knowledge to attendees.
  
  
• Facilitators – a seasoned professional who uses trainee interaction and involvement to accentuate key learning points rather than trying to impart their knowledge to others.
  
  
• Presenters – a lecturer or performer who presents a limited-scope topic and has the ability to answer limited questions and handle much interactivity.
  

Given the type of program or the size group that it will be delivered to, one type of trainer may be better than another or qualities from different types may be required.

Evaluation prior to delivery
Would you hire a manager without an interview? Would you expect someone to agree to work for your company without asking questions? Both are highly unlikely. While an external trainer may not be on payroll, they may play a pivotal role in communicating organizational expectations throughout a company. The utmost care must be taken to insure a good fit. As such, here are some important items that should be addressed:

• Is the trainer delivering just one session? If so, a telephone conversation prior to the training session will likely suffice. It is important to identify how articulate the trainer is, how personable they are, for you to ask them questions and – most importantly – they ask you questions about your company, trainees and issues.
  
  
• Is the trainer delivering more than one session? If so, a personal meeting is highly recommended. During the meeting, the trainer should meet, as appropriate, management, trainees and possibly tour the facility. It is important that they get to know the culture, employees and management so that the training is optimized. During this time, you should be in tune with what questions they ask and whether or not they will have rapport with the trainees.
  
  
• Is the training topic(s) compliance-oriented? The trainer must thoroughly know the topic for the audience to be trained. If the audience is more familiar with the topic than you are, you should either become more familiar or ask trainees to pose some questions. The purpose is to identify whether a trainer answers correctly, confidently and authoritatively.
  
  
• Are the topics soft skills or behavior-related? In these programs, the trainer must be engaging, dynamic and not a subject matter expert, per se. The trainer should be a facilitator first and foremost. Their ability to have rapport with trainees is paramount.
  
  
• Should a sample-teach be conducted? If you are not 100% comfortable with the training provider or have not met any of their trainers, then a sample-teach may be necessary. Be sure to agree on the duration of the sample teach and topic. Sample teaches typically should not exceed 1 hour. Be realistic on what can be covered in a limited time frame.
  
  
• Does the trainer need industry expertise? It all depends on the topic. Routinely, specific industry expertise is not required for soft skills or behavior-related topics. On the other hand, expertise would be required for technical training.
  

During delivery
Just like performance management, continuous feedback to the trainer is required to maximize performance. If only one session is being delivered to one group of employees, the feedback is negligible compared to delivering several sessions to several groups of employees. Observing training is one way to provide immediate firsthand feedback (during breaks). Talking to trainees outside the learning environment, getting their feedback and recommendations is a great way to provide performance-related feedback to the trainer. Do not be afraid to discuss concerns, feedback or improvements with the trainer. They, as you, want the program to be a success.

After delivery
After training is completed, it should not be forgotten. Continue to refine your evaluation criteria. Keep a log: What went well, what could have been improved and what characteristics of the trainer and the training program you valued. These can be shared with future providers and will make the trainer selection and evaluation process much easier each time it is done. It will also provide invaluable guidance to future trainers.

Conclusion
I hope this article conveys the interactive process involved in trainer evaluation. While the trainer plays a pivotal role, the individual who selects the trainer is the key individual responsible for all facets of the program’s overall success. Without an open and honest dialogue between the trainer and all appropriate parties, the program’s success may be in jeopardy.

Recession-Proof Your Hiring Process

Everywhere you turn, everyone is talking about a recession – are we headed for a recession or are we already in one – or are we talking ourselves into one?

While the world is busy looking up to see if the sky is really falling, one of the most critical business processes that routinely heads straight down into the basement of corporate priorities is recruitment. It makes sense: recruiting is something a company does when it is expanding, launching new products, and building new teams – all things businesses do in boom times. But an economic downturn is exactly the time that businesses should be thinking strategically about recruitment, from putting the most efficient, belt-tightening processes in place to cherry-picking top talent that may be on the market as a consequence.

Being a great suitor AND a sifter
Thinking strategically about recruitment is much more than just developing an annual staffing budget. To recession-proof recruitment, develop two strategies, one for each extreme of the job market spectrum: job- rich/candidate-poor and job-poor/candidate-rich. With a plan in place for both contingencies, managers can stop worrying about Wall Street and start solving the problem at hand: filling openings quickly with quality candidates.

For the past three years, we’ve been in a job-rich/candidate-poor environment and the “War for Talent” is once again a ubiquitous rallying cry in human resources circles. In a job-rich environment, attracting talent requires a “Suitor” strategy with three key differentiators:

1. An aggressive plan to source passive talent, implemented by knowledgeable recruiters and anchored by a compelling description of the opportunity.
   
   
2. A high-touch screening process that “courts” candidates with friendly, professional and timely communications.
   
   
3. Streamlined interview and offer processes, enabling, for example, same-day offers for key candidates.
   

On the other hand, if a downturn does take hold and suddenly all of those jobs dry up, the pendulum swings to a job-poor/candidate-rich environment, and a very different set of recruiting rules. A successful “Sifter” strategy should include:

1. Meticulously crafted marketing messages that not only attract qualified applicants, but turn away candidates who are not a fit.
   
   
2. Investment in technology to facilitate the rapid screening/ranking of a large volume of resumes.
   
   
3. Revisiting and improving the candidate experience – for every candidate, qualified or not – from your careers page to offers, eliminating the “black hole” experience.
   

One critical mistake businesses historically make in a “Sifter” economy is to treat the influx of job seekers with contempt. Job seekers have a long memory, and one resentful applicant in 2008 could be the star candidate who declines your offer in 2010. On the other hand, something as simple as a courteous “thank you for your interest in our company, but this position is now filled” could earn entrance into a rich referral network somewhere in the future. Wherever possible, use every candidate touch to build goodwill.

Spend on hiring
Paradoxical, maybe, but a recession is a great time to recruit. Forward-thinking businesses capitalize on the talent that unexpectedly finds itself on the street to build “future teams” that will help them reach their long-term growth targets once the economy inevitably turns around.

And thanks to the Federal Reserve, recessions are becoming shorter and less severe, so by the time you have your superstars through training, the economy might well cooperate and grow like gangbusters along with you.