The Unintended Consequences of an Aging Workforce

Today, older Americans eligible to retire are opting in record numbers to postpone their workforce exit. Many are choosing instead to stay in the game by continuing working with their current employer, cycling in and out of work as necessitated by the cost of living, consulting, or following a new productive path.

Their reasons are simple. First, some older works are staying on the job longer to bolster their retirement savings in uncertain economic times. Second, others want to extend employer-provided (or assisted) health coverage for themselves and their families for a few more years, and current law requires full-time employment for the continuation of that benefit. Third, some want the continued fellowship employment offers, and the meaningfulness, mental stimulation, and physical activity many gain from working. Fourth, as the public sector and many industries face the prospect of losing to retirement their most knowledgeable and skilled employees, the relative value of older workers is slowly being realized. This should create more flexible and favorable employment arrangements for those who can actually retire but elect to postpone retirement.

Although these obvious benefits are significant to Baby Boomers, a case can be made that it is in the nation’s best interests for everyone to work longer, even beyond the normal retirement age. Simply by working longer, the Social Security and Medicare systems, now at risk of failure, can be extended into the future, thereby allowing more time and options for proper fixes. But there are a number of discouraging obstacles that make the postponement of retirement difficult for many workers.

Discouraging obstacles
Despite more favorable perceptions about aging and the viability of older workers today, persistent obstacles exist for mature (55-64 years old) and older workers (65+ including retirees) seeking continued or new employment. There are also difficult barriers facing employers wanting to attract, engage and retain these workers. Here is a list of the common obstacles and barriers:

• Most employers have not yet experienced significant labor shortages or other economic pressures requiring them to consider more flexible employment arrangements, pension fund modifications or various training/succession planning programs that would include engaging mature and older workers.
  
  
• Many employers do not yet consider hiring and retaining older workers as a business strategy because of the following:
• limited suitable work opportunities for older workers
• difficulty in recouping the costs of hiring and training older workers
• “incompatibility” of older workers with corporate culture
• restrictions on in-service distributions
• erroneous perception that mature and older workers have lower productivity than their younger counterparts
• increased health costs for older workers
• potential for age discrimination lawsuits


• Unions acknowledge they have not addressed flexible employment programs broadly enough as part of collective bargaining agreements, often citing the lack of interest on the part of employers and difficulties in establishing effective scheduling programs and production processes.
  
  
• There are few national or regional (nontraditional) recruiting organizations that have taken the initiative to promote and market accomplished retired and older workers.
  
  
• Older workers retire or stop their employment when:
• traditional work arrangements cannot accommodate evolving personal or family needs
• gradual reductions of their hours (as they age on the job) are not possible
• laid off; mature and older workers who are laid off rarely return to full-time employment and those who subsequently return to work, often retire due to the lack of flexibility of their work schedule
• younger workers (under 50 years in age) negatively perceive mature and older workers as competitors, impeding their own advancement and pay raises, and subsequently create a hostile work environment
• there is increased conflict in the workplace due to cultural, social, and multi-generational factors
  
  
• About half of all working American have private pension funds through their employers. But most retirement funds have built-in disincentives, discouraging employers and older workers from continuing a productive relationship after retirement.
• Pension programs are legislated and subject employers to restrictions on the design of retention programs for older workers.
• Some pension programs do allow workers to continue accruing benefits after age 65, but at a much lower rate.
• Many pension programs encourage early retirement, but tend to financially penalize older workers from returning to employment after becoming eligible for benefits; pension laws have actually prohibited working for the same employer while receiving retirement benefits. (The Pension Protection Act of 2006 does contain a provision that partially reverses this latter restriction.)
  
  
• Social Security itself penalizes early retirees in two ways. First, it reduces the dollar benefit payout. Second, recipients who decide to go back to work before reaching their full retirement age will have their benefits reduced by one dollar for every two or three dollars that they earn above a set threshold. This is an obvious disincentive for continuing to work after retirement.

Remedies and strategies
In a 2007 report by the Government Accountability Office, it was noted the number of 55 and older workers in 2000 was approximately 18.3 million, or 30 percent of the workforce. By 2015, older workers will account for 31.8 million, or 37 percent of the labor pool. Mature participation in the workforce will continue to rise due to projected labor and skill shortages, albeit slowly, over the next 10 years, to 36.6 million, where it is likely to level off and remain until 2030 as the trailing-edge Baby Boomers prepare to retire. Interestingly, during this same period, older workers are also projected to comprise a progressively larger number of blue-collar and white-collar positions (including top executives and owners) in the workplace. In short, employers will continue to rely heavily on this segment of the workforce for expertise, “institutional knowledge,” and a durable work ethic.

Whether these projections are realized will depend upon how society addresses the obstacles noted above and ultimately supports older workers remaining in the workforce. Clearly, educating both employers and workers on the issues will go a long way toward eliminating myth, prejudice, and inaccurate perceptions about mature and older workers, and their employment capabilities. Beyond education, it will also be necessary to develop remedies and strategies to remove structural obstacles. Below is a list of possible incentives, education opportunities, and program strategies that will promote the hiring and retention of mature and older workers.

Legislative remedies
Currently, lawmakers and government agencies have begun to influence projected labor shortages by convening an interagency task force to develop regulatory and legislative proposals addressing issues affecting mature and older workers.

• Social Security Administration (SSA) has implemented several changes to the retirement policy. In April 2000, SSA eliminated the restriction of reduced benefits for those older workers wanting to work beyond age 65 years and 4 months. For older workers choosing to retire after normal retirement age, benefits are not lost but accrued and paid out as normal retirement benefits. In addition, Congress has raised the normal retirement age for future retirees. And there is legislation under consideration to establish Medicare benefits as the primary insurer
  
  
• Other legislation under consideration is the attempt to make work and the workplace more hospitable for older workers by promoting the employment of older workers based upon their abilities rather than age, and clarifying prohibitions on age discrimination. (Specific statutes vary by jurisdiction and application.)
  
  
• Federal government provides preferential tax treatment to employers establishing and maintaining pension plans for their employees. To receive the preferential tax treatment, employers are to design a pension plan within the legal limits that influences the older workers to stay longer on the job.
  
  
• There is a need for safe harbors in the tax code and the Employee Retirement Income Security Act that would make it easier for people to return to work after retirement and still collect their pensions.
  

Employers’ remedies
While there are still a relatively small number of employers who presently have programs in place to retain older workers, there is growing interest in adopting more flexible relationships with these individuals and attracting talented and experienced older workers from outside the organization. Employers in both the public and private sectors are using or considering using an array of employment arrangements, including:

• Flexible time. Changing shifts, compressing the work week, individualizing schedules
  
  
• Reduced time. Part-time, temporary, and leave-of-absence programs
  
  
• Cyclical time/seasonal/contract work. Project-based or contract workers will focus on a project for a number of weeks or months, complete the work and then either take a break or move on to a new contract
  
  
• Flexible place. Telecommuting, or working from multiple locations, or no fixed location for work
  
  
• Task, not time. Instead of working 9 to 6, for example, employees would have a task and be required to put in only the time that it takes to get the work done
  
  
• Job sharing. When two people voluntarily share the duties and responsibilities of one full-time position.
  
  
• “Onboarding,” mentoring, and succession planning programs. A working relationship between someone more experienced with a less experienced counterpart to transfer, integrate and prepare for tasks, roles or work experience
  
  
• Advisory board. A committee of employees assisting in the exploration, recommendations and promotion of changes in the workplace.
  
  
• Literacy training. Workshops or seminars which prepare workers to make informed decisions. Currently, pension programs sponsored by the employer include financial literacy training. Other employer literacy training could include; multi-generational issues, critical thinking, retirement, and cultural diversity.
  

Remedies for union and recruiting organizations
While acknowledging the importance of older workers in the workplace, and the challenging issues inherent in some traditional work environments, unions can begin the dialogue to explore:

• flexible employment programs
  
  
• job re-design to adapt the work to the abilities of older workers
  
  
• a mix of benefits and incentives to attract and retain older workers
  
  
• venues that offer literacy up-skilling

There also should be open discussions with local, regional, and national organizations about developing effective action campaigns that result in a greater valuing of older workers. For example:

• Local, state and federal governments can act as model employers of older workers
  
  
• Establish a clearinghouse for best practices for using and engaging older workers
  
  
• National or regional (nontraditional) recruiting organizations could be sponsored and hosted by chambers of commerce to compile a database of retired or older workers, based on skills or prior experience or both
  
  
• Employers could establish partnerships with national organizations such as AARP to advertize their willingness to hire, re-hire, and retain older workers
  

Mature and older workers are a growing national resource. They can and must play an important role in meeting the economic challenges and opportunities before us as a nation, particularly as the number of skilled individuals entering the workforce declines over the next two decades. There is still much still to be done and little time to waste as 78 million Baby Boomers approach retirement.

Branding Human Resources

With gas prices reaching historic rates and the overall economic conditions declining, companies are thinking about reducing head count. At the same time, their also looking for ways to retain their good employees. Meanwhile, employees are trying to find stability. This usually means they are looking for new opportunities. They want to make sure they do not become a statistic. What are the factors that keep your talent from answering a headhunter and interviewing with your competitors?

You hear people talk about becoming an “employer of choice.” The phrase is more than just a buzzword; it is representative of a whole new design of corporate culture. It means that people will choose to work for you. Translated, it means higher employee engagement, which usually means higher productivity. It also means that people will choose to stay with you, even when they are being courted by recruiters from other employers – recruiters with exceptionally attractive inducements.

How does an employer become an employer of choice? What does it mean to be an employer of choice, and how do you structure your company to meet that goal?

The first thing an employer of choice does better than most companies is communicate with their employees. By using their website and handbook, they send a message to both candidates and employees that they care. They use both ways to convey how they feel about talent. They create an environment that is mutually beneficial, leading to higher levels of employee satisfaction, engaged employees and something unheard of today, employee loyalty. And, they use marketing techniques to ensure the message is delivered.

Branding and marketing is not a new idea. Take Amgen, for example. Amgen was creating its brand in the early 90s. When I moved from the Valley to Thousand Oaks in 1991, I asked my real estate agent about companies in the Conejo Valley. She told me that Amgen was a great company to work for and had a reputation for being the best employer in Thousand Oaks. She even knew the name of the Director of Human Resources. When you met an employee at Amgen, they were very happy and engaged. They felt they were blessed to be working there. Amgen rarely ran employment ads because they received more than 2,000 unsolicited resumes a week. People told me that their employment process was slow, and you had to interview with a lot of different people to be offered the job, but it was worth it.

Amgen’s Human Resources reputation is priceless. Indeed, HR can make or break an enterprise by itself. Countless organizations have gone under for one simple reason: they did poorly in the public eye, and thus lost the opportunity to obtain quality human capital. The simple truth is that while a company might be financially successful, employees don’t look at numbers as a key factor for employment. Instead, they look at how employees are treated, and what is the company’s level of nurturing and caring for its workforce.

It means building a culture that treats employees with dignity and respect. It is creating an environment where employees’ needs are met. A company should recognizes that once an employee accepts a job, his or her goals are likely to change after being hired. Before they are hired, the most important items are compensation and benefits. Now that they are employed, they are more interested in “how do I grow within the organization?” They want training so they can take on more responsibility and earn promotion opportunities. They are always looking for work/life balance.

For example, do you allow employees to telecommute, offer alternative work schedules, and provide for flexible work schedule? In short, does your company try to balance work and life?

The importance of branding HR and the company as an “employer of choice” is best illustrated by its people; i.e., does it count on people to make the company work? Your success in business depends on your ability to attract and keep the best talent. So what better way to improve the quality of this “people business” than to take a lead from the marketing domain by using effective and productive marketing techniques applied directly to attracting potential candidates.

The career/jobs section of your website should market what it’s like to work at your company. There should be separate pages for benefits and training and development. It should be easy to use. Your candidates visit the site to get an idea of who you are. How many clicks of the mouse does it take before they get to your company mission and values? If it takes 10 clicks to find the CEO saying that employees are the most important asset, that’s too many clicks.

Companies spend millions of dollars each year to recruit the most talented employees in the marketplace. Today more than ever, it is important to brand your human resources department. Candidates are bombarded with information about the ideal workplace. They start with your website, and move onto Google, Zoominfo, LinkedIn and Facebook. Some companies are using youtube.com to show candidates what it’s like to work for them (Google does this).

Creating a brand that portrays your company as a great place to work is essential to attracting talent. Retaining that talent requires that you create a caring, nurturing work environment that treats employees with good faith and fair dealings.

Retention programs also include talent development so employees can be more productive. Although it may require some time and resources, the long-term benefits of establishing a desirable work environment far outweigh the costs. The result of decreased turnover, increased productivity and less focus being applied to recruiting, all lead to a more successful, team-oriented company. These organizations are then able to spend their time and energy on developing, rather than maintaining, their businesses.

Are Employers Finally Getting a Break on “Break” Enforcement?

On July 22, 2008, the California Court of Appeal gave a favorable nod to employers regarding their responsibility for monitoring breaks. In Brinker v. Superior Court (Hohnbaum) (Fourth Appellate District), the court held that the employers must provide meal and rest periods by making them available, but need not ensure that they are taken.

In turn, the Labor Commissioner, on July 25, 2008, issued a memorandum to the Division of Labor Standards and Enforcement (DLSE) staff mandating that the Division adopt the Court’s ruling in its enforcement policy. The DLSE had previously interpreted the meal and rest period requirements to carry with them an affirmative employer obligation to ensure that they were taken—and taken within strict parameters. The following outlines the Court’s decision and the DLSE’s new policy.

Meal periods
The Court ruled that Labor Code Section 512 and the wage orders mandate that these periods must be made available, but employers need not ensure that they are taken. “Employers, however cannot impede, discourage or dissuade employees from taking meal periods.” An employer must make a first 30-minute meal period available where the hourly employee works more than five hours a day, unless (1) the employee works six hours or less per day, and (2) a written mutual consent to waive the meal period is signed by both employer and employee. Furthermore, the Court ruled that there is no “rolling five-hour meal period” requirement. That is, employers are not required to provide a second meal break five hours after employees return from to work from their first meal break.

The Court did interpret Labor Code Section 512 to provide that an employer must make a second meal period available where the employee works more than 10 hours unless the total hours do not exceed 12 hours and two conditions exist: (1) a “mutual consent” agreement is signed by both employee and employer, and (2) the first meal period is not waived. (The Court did not address language in wage orders 4 and 5 that allow healthcare workers to waive a second meal period.)

Rest periods
The Court held that employers must provide rest periods, but they need not ensure that they be taken. As with meals periods, employers may not dissuade or discourage employees from taking rest periods. Rest periods must be authorized and permitted “every four hours or major fraction thereof”.

The Court interpreted “a major fraction thereof” differently than the Labor commissioner’s 1999 interpretation. The 1999 interpretation viewed “a major fraction thereof” to mean any time beyond the midpoint of each four-hour block of time. The Court disagreed and ruled that a rest period must be given if an employee works between three and one-half and four hours. If four or more hours are worked, then a rest period need be given only every four hours, not every three and one-half hours.

Additionally, the Court ruled that the rest period provisions do not require employers to authorize and permit a first rest period before the first scheduled meal period. “As long as employers make rest periods available to employees, and strive, where practicable, to schedule them in the middle of the first four-hour work period, employers are in compliance with that portion of the applicable wage order.”

Caution to employers
This case may be appealed to the California Supreme Court. Although the DLSE has adopted the court’s decision into its enforcement policy, employers are advised that a court would not be bound by this policy. Employers are therefore advised to exercise caution and seek legal counsel before implementing the allowances of the Appeals Court.

Other elements of the decision
In addition to meal and rest periods, the Court also ruled on off-the-clock- work, class suit certification standards, and the absence of written waivers. For a detailed discussion on these elements and further information on meal and rest periods, please refer to the case analysis written by a member of Employers Group’s Legal Committee, Richard Simmons. Attorney Simmons wrote an amicus brief for the court on behalf of employers. The case analysis can be found at: http://www.employersgroup.com/newsandlegislation/brinkercase.shtml.

Travel Time

The California Labor Code, under Section 2802, requires employers to indemnify employees for all expenses incurred in connection with their employment. Exactly how and at what level travel and expense reimbursements are to be paid for nonexempt workers is somewhat confusing for employers. So, let’s start with a few common scenarios for clarity.

Scenario 1
A worker is asked to travel out of town over the weekend, and is expected to be available to work first thing Monday morning. The worker departs from his/her home at 8 a.m. Saturday; arrives at the airport by 9 a.m.; arrives at the destination airport by 11 a.m.; and arrives at the hotel by noon. They spend the rest of Saturday and Sunday sightseeing. The worker is expected to work regular hours Monday and Tuesday, then fly back home after working regular hours on Tuesday. What is compensable?

The time spent commuting from the worker’s home to the airport, checking in, boarding and commuting, and also through the time it takes commuting to reach the destination hotel, is all deemed as “hours worked.” The worker is carrying out the employer’s directives, which are all compensable. The time the worker spends sightseeing, sleeping or pursuing personal interests is not considered as hours worked, and therefore it is not compensable. When the worker reports to a worksite, the time is compensable until the work day ends. Conversely, all hours spent traveling back until the worker reaches his/her home is compensable.

Scenario 2
A worker is asked to report to an out-of-town meeting during their regular work hours. The worker departs from the work location at 10 a.m., goes to the airport and reaches the out-of-town work location by 12 p.m., just in time for the networking lunch. After the meeting, everyone gets together for a casual dinner where they happen to discuss the latest business trends. The worker finishes dinner at 7 p.m. and arrives at the airport where the flight is delayed for an hour. The worker doesn’t return home until 2 a.m. the following morning. What is compensable?

The Labor Commissioner states that time spent traveling during regular and non-regular work hours are considered hours worked when it is per the employer’s instruction to travel. Even if the hours traveling are considered to be non-productive hours, such as a delay between flights, the employer is obligated to compensate for such time. Additionally, networking meals where business is conducted or discussed is considered “hours worked.” In some circumstances it may be uncertain if your worker were required to attend a lunch or dinner, consider if the worker is engaged in business discussions, planning, etc. If so, this time is also compensable. Finally, this employee should be compensated until arriving home at 2 a.m.

Scenario 3
Your worker is asked to attend a convention, which is within a day’s commute. The worker will be at this convention for three days. It will not take this worker any more time to travel to the convention than it would for this worker to commute to work. The convention includes breaks and meals, although one of the meals will be a “productive lunch” where a speaker will introduce “light” content. What is compensable?

The time the worker reports to the convention, until the convention concludes, and the worker is relieved of all duties, is considered “hours worked.” In circumstances where the commute time to a meeting location exceeds their normal commute time to work, the employer may consider deducting their normal commute time from the meeting location commute. Time spent breaking for meals is not considered hours worked except for the day when there is a “productive lunch.” This would be considered a working lunch, and therefore compensable.

Other issues
Workers must be indemnified for all necessary expenses incurred during travel. This may include meals, lodging, Internet, mailing, parking, tolls, laundry, car rental and mileage, for example.

It is always best to set expectations prior to a nonexempt employee travel date, such as:

• Review your travel policy.
  
  
• Be clear about the time travelers are expected to arrive at the airport (two hours prior to departure, for example).
  
  
• Notify traveler of current airport rules and carry-on luggage requirements.
  
  
• Give the contact information in case of emergency.
  
  
• In cases of illness or injury, have the traveler seek immediate medical attention (contact hotel or facility staff) first, then notify the employer.
  
  
• Give traveler a set “per diem” for meals and any other out-of-pocket expenses that they may incur.
  

Mileage
Workers must also be reimbursed for mileage expenses incurred out of their travel. The employer must reasonably indemnify a worker for the vehicle’s use and maintenance in the course of carrying out an employer’s directive. The Division of Labor and Standards Enforcement indicates that the current IRS mileage rate is a “reasonable rate” and would be considered as indemnification of expenses incurred for the vehicle’s use. If the employer believes that an employee’s actual mileage expenses are less than the IRS rate, the employer must prove that the employee’s actual expenses for the vehicle’s use are less and must maintain complete records of these facts. Likewise, if the employee claims that actual vehicle usage expenses are greater than the IRS rate, the employee must prove that the actual costs for the vehicle’s use exceed the IRS rate.

In summary, California workers must be indemnified for all expenses incurred by reason of pursuing the directives of their employers. There are many specific and unique scenarios that you may encounter, so please call our Helpline to discuss your worker’s travel situation, 800.748.8484.

Communicating to Employees in Other Languages

Currently, the U.S. is the fourth-largest Spanish-speaking country in the world, and minorities are the fastest-growing sector of the U.S. workforce, according to the U.S. Department of Labor. Immigration continues from Latin America and other countries at a steady pace. A shortfall of labor of some 10 million workers is anticipated, which will increase dependency on immigrant employees. It is hard to keep ignoring the fact that you will need to provide at least some communication to your employees in other languages.

Some companies have already started to translate many of their documents for employees to create better communication and boost morale. Restaurants and hotels have led the way and have realized for quite a while that translating documents is important to create uniformity.

Documents to translate
Some of the documents that companies feel are important for employees to understand are: employee handbooks, safety training, employee benefits enrollment forms, 401(k) plan/forms, newsletters, performance review forms (and explanation of procedures), procedural manuals, sexual harassment training, sick leave policy, employee satisfaction surveys and notices about company events. Translating some of these documents helps to convey to your limited-English-speaking employees that the company culture, the benefits, and professional development opportunities are offered to all employees. Bottom line, it shows that you care about all your employees.

We also have to realize that regulations vary from state to state. In California, for example, companies with 50 or more employees, and those where 10 percent or more speak a language other than English as their primary language, need to pay attention. These companies are legally required to translate certain policies and notices into the language or languages spoken by theses groups of employees. Some employment attorneys will encourage their clients to translate, at a minimum, the equal employment opportunity policy, the sexual harassment policy, pregnancy disability leave and family care leave policies, at-will employment policy, rest and meal break policies, disciplinary policies and safety rules.

Hiring a translator
Bilingual employees can be instrumental in helping out in day-to-day verbal translations. But can you make sure that the communication of policies, safety and in-house procedures are being communicated effectively to employees with limited English? This is more complicated. It can be a risk allowing a bilingual employee to orally translate a policy because he or she may not be translating it correctly—especially if they themselves do not completely understand it. This is particularly true when trying to translate employment laws versus a company procedure.

For this reason, you need to do your homework to find a good translator or service. The translator must be well educated in the language he/she is translating, and must have a strong command of and understand the tricky nuances of English. The translator must be well versed in employment policies and practices. Be careful in hiring a service that is too cheap. They may be translating your documents, but it could be a literal translation that doesn’t really say what you want it to say. The translation may even have offensive language and cause confusion.

Quality is your number-one priority for the translation. Get referrals from your peers and check the service’s references. You need to find out who will be translating your documents and their qualifications. Find out how many individuals will check the documents before going to press. Remember, these translated documents represent your company. If the document is not well written, your company can be viewed as unprofessional. Ask some of your bilingual employees to review some of the translated samples to see if there are any mistakes and verify that they understand what is being stated.

The English document needs to be well written in the first place. If you have a poorly written document, you will receive a poorly written translation. The translator’s job is to keep the document close to its original. A good translator will ask you questions if a certain syntax or vocabulary is specific to your industry. Sometimes, the translator may ask to speak to someone in your workforce to find out what words they may use in their language specific to the company’s vocabulary. This does not mean the translator is not experienced. It just ensures that the translation will be understood by your employees.

By investing the time to translate documents, you will have a workforce that will have a better understanding of your policies, culture and procedures. This will help minimize errors, strengthen communication and show that you care about them.

A Scary Monster Lurks –
The Employee Free Choice Act

Editor’s Note: The following is an editorial written by Bill Leopardi, President, Cruz & Associates, who is a featured speaker at Employers Group’s Workplace and Employment Law Update (WELU). The WELU is an annual one-day event held at various locations throughout California in late October and November (see back page). Employers Group neither endorses nor opposes the opinions expressed in this editorial.

It is the summer of 2008 and, again, we find ourselves in the throes of another presidential campaign. Unquestionably, the war in Iraq, terrorism, the economy, energy, gas prices and, of course, global warming, are in the forefront of the debate. But a scary monster lurks just over the hill – Capitol Hill that is. The Employee Free Choice Act (EFCA), federal legislation that has been introduced, but failed to pass, in three prior congressional sessions, will certainly be introduced again. Given the current political climate, the bill clearly has its best chance of becoming law early in 2009.

Frustrated by their inability to grow their ranks through either traditional organizing or even well-financed corporate campaigns, organized labor and its political allies have devised new rules and procedures that would radically change the face of union organizing. The EFCA would amend the National Labor Relations Act by eliminating the NLRB secret ballot election and replacing it with a mandatory card check procedure.

But it does not stop there. The EFCA would also mandate binding arbitration for first contract negotiations, increase back pay to three times lost wages for an “unlawful” discharge of a union supporter, provide civil fines of up to $20,000 per violation, and require the NLRB to seek immediate injunctive relief (i.e., issue restraining orders) whenever there is reasonable cause to believe that an employer has interfered with employees’ rights to organize.

Here are a few questions and answers that will help you understand and follow this legislation.

What will this really mean to the employer community if it becomes law?
In practice, union organizers could tell your employees just about anything to get them to sign a union authorization card, and you may not even know it is happening. From our experience, this already occurs all too often. If a majority does sign, there is no discussion, no debate, no campaign and no secret ballot election. You would proceed directly to negotiations within 10 days after receiving a written demand from the union where you would reach an agreement with your new union “business partner.” If you did not reach an agreement within 120 days, an arbitration panel would write your contract for you... and it would be binding on you for at least two years.

What is the status of the EFCA?
The 2007 version of the bill had 233 co-sponsors in the House of Representatives (H.R. 800) and 46 co-sponsors in the Senate (S. 1041), including Barack Obama. In 2007, the bill cleared the House of Representatives, but facing a potential filibuster and threatened presidential veto, it failed cloture and was never put up for a vote in the Senate. It is, today, organized labor’s highest priority for the first one hundred days of the next administration.

Who is leading the opposition to this bill?
Given the seriousness of this legislation, organized opposition to the bill is growing, with the U.S. Chamber of Commerce having taken the lead. When the EFCA was under consideration in 2004, Charles Cohen, a Clinton appointee who served on the five-member National Labor Relations Board from 1994 to 1996, testified on behalf of the U.S. Chamber against the bill. To view his testimony, go to:
http://www.uschamber.com/issues/testimony/2004/040716employeefreechoiceact.htm

What does Cruz & Associates recommend if it appears that the EFCA is to become law?
We believe that every organization should put a three-pronged strategy in place.

1. Create and implement a comprehensive, forward-thinking, positive employee relations program.
   
   
2. Establish mechanisms for continually assessing the employee relations climate at each of your sites so that you can respond immediately to indications of employee dissatisfaction.
   
   
3. Develop a pro-active communications program to educate your employees about the fact that they have lost their right to a democratic secret ballot election and the importance of finding out the real facts before signing a union authorization card.

Some final thoughts
Don’t wait for the EFCA to become a reality. The first two recommendations above should already be at the core of your company’s strategic employee relations plan. There are so many beneficial outcomes totally independent from union organizing. Make the time…..now.

Supreme Court Restricts Non-competition Agreement

The California Supreme Court recently determined that a non-competition agreement is not valid unless covered by a specific legal exception. Also, the Court found that an agreement is not void simply because it calls for a waiver of “any and all” claims, since even with the use of those all-encompassing words, the agreement still cannot waive certain “nonwaivable” legal protections: see Edwards II v. Arthur Andersen LLP (2008).

Raymond Edwards II was hired as a manager by Arthur Andersen LLP in 1997. His employment was contingent upon his signing a non-competition agreement. The agreement restricted his employment if and when he left the company. It stated in part: “If you leave the Firm, for eighteen months after release or resignation, you agree not to perform professional services of the type you provided for any client on which you worked during the eighteen months prior to release or resignation. This does not prohibit you from accepting employment with a client. For twelve months after you leave the Firm, you agree not to solicit (to perform professional services of the type you provided) any client of the office(s) to which you were assigned during the eighteen months preceding release or resignation. You agree not to solicit away from the Firm any of its professional personnel for eighteen months after release or resignation.”

During his employment he was promoted to a senior manager, and was on track to become a partner. The company, however, was indicted in 2002 regarding an Enron Corporation investigation, and subsequently stopped doing business in the United States.

Edwards’ work group was then taken over by Wealth and Tax Advisory Services (WTAS), a subsidiary of HSBC USA, Inc., and he was offered employment with WTAS. The offer was contingent on him signing an agreement that would cancel the non-competition agreement he had signed earlier with Andersen. The new agreement, titled “Termination of Non-compete Agreement” (TONC), required (in part) that Edwards: “(1) voluntarily resign from Andersen; (2) release Andersen from ‘any and all’ claims, including ‘claims that in any way arise from or out of, are based upon or relate to Employee’s employment by, association with or compensation from’ defendant; (3) continue indefinitely to preserve confidential information and trade secrets except as otherwise required by a court or governmental agency; (4) refrain from disparaging Andersen or its related entities or partners; and (5) cooperate with Andersen in connection with any investigation of, or litigation against, Andersen.”

If Edwards signed the agreement, Andersen would then agree to accept Edwards’ resignation, and agree to Edwards’ employment by HSBC, and release him from the non-competition agreement he signed in 1997. Edwards was not hired because he refused to sign the TONC.

Edwards refused to sign because he believed he would be giving up his statutory right to indemnification, i.e., compensation for any employment-related loss or damage he might sustain. He was concerned about the government’s investigation of Andersen, and that his expenses may not be covered if he were to become a defendant in any related lawsuit.

Labor Code section 2802(a) states that “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.” And Labor Code section 2804 provides, “Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void, and this article shall not deprive any employee or his personal representative of any right or remedy to which he is entitled under the laws of this State.”

The Court found that the TONC didn’t specifically refer to indemnity rights, and that it shouldn’t be read as encompassing a waiver of Edwards’ indemnity rights. “Giving the TONC such a reading is consistent with the tenets of contractual interpretation because it makes the contract lawful, valid and capable of being carried into effect. In addition, our conclusion makes it unnecessary to insert additional language or terms into the contract, which is consistent with Code of Civil Procedure section 1858 and its mandate that when courts construe an instrument, a judge is ‘not to insert what has been omitted, or to omit what has been inserted....’ [I]t is one of the cardinal rules of interpreting an instrument to give it such construction as will make it effective rather than void. …We apply this rule in holding that a contract provision releasing ‘any and all’ claims, such as that used in the TONC in the present case, does not encompass nonwaivable statutory protections, such as the employee indemnity protection of section Labor Code 2802. In so holding, we interpret the TONC such that it does not violate Labor Code section 2804. As a consequence, the TONC is neither unlawful nor null and void.”

All employers who have non-competition agreements should have them reviewed, and rewritten if necessary, to be in compliance with this decision. Additionally, in this case, the Court deliberately did not address the applicability of the so-called trade secret exception to Section 16600.

Minimizing the Effect of Gas Prices for Employees

Prices at the pump are still costing drivers close to $4 a gallon—and are predicted to rise again to the almost $5 of July and early Augugst—prompting businesses to look at practical, cost-effective options that provide relief to employees. In early August, Employers Group conducted a survey among its members asking them what they were doing to minimize the effect of gas prices on their employees; 222 California employers responded and the results of the two-day survey are summarized here.

Have fuel costs impacted your company?

• 77% of total respondents said “yes.”
  
  
• 79% of companies in Southern California said “yes” and 67% in *Northern California said “yes.”
  
  
• Larger companies reported impact at a higher rate than smaller size firms: 87% agreed that increased fuel costs had impacted their organization.

* Responses from Northern California and San Diego were drawn from a small population of respondents, 18 from Northern California and 24 from San Diego, respectively.

How have fuel costs impacted your business?

• 27% of companies reported experiencing voluntary terminations from employees needing to reduce their commuting time.
  
  
• 10% reported experiencing higher absenteeism rates.
  
  
• 13% reported impact on their productivity levels.
  
  
• 56% reported an increase in cost of goods and services.
  
  
• 21% reported a drop in sales.
  
  
• 33% reported that they are reassessing budget allocations.

* Figures for Northern California companies were lower in each of the foregoing survey options vs. statewide figures.

What are you doing to alleviate employee commuting costs?

What are your plans for alternative work schedules to assist employees with higher fuel costs?
Forty-five percent of companies surveyed reported that they would allow flexibility in starting/quitting times to avoid high-traffic commute times, and 20 percent would institute telecommuting. Another 17 percent would compress workweeks, such as four 10-hour shifts; and 14 percent would implement 9/80 shifts, whereby an employee works nine hours every Monday through Thursday, and takes off every other Friday.

What work strategies (see chart) are you instituting to offset higher fuel costs?

At this writing, gas prices continue to fall and there is some measure of relief for all of us at the pump. Still, the prices are higher than they’ve ever been, and it is good to know that employers are thinking about their employees when it comes to the cost of getting to work.

Introducing the HR Summit –
A Program for a New Kind of Workplace

One year ago, who would’ve thought any of these would be in our vernacular: Five dollars for a gallon of gas, Cheech and Chong reuniting for yet another movie, Brett Favre playing for the NY Jets or China declaring that they have the ability to make it rain! While it is impossible to predict what will happen next, what we can do is prepare for change. Change will definitely occur and it seems to occur more often when managing or leading a company’s HR function.

About a year ago, those in senior-level HR profession and those leading the HR within the organization expressed their desire for a WELU-type (Workplace & Employment Law Update) program specifically geared to them. Later this year, we will deliver the first of many programs geared specifically to this group: Employer Group’s HR Executive Summit.

Co-sponsored by USC Marshall School of Business
I’m happy to say that this program, which is co-sponsored by USC, is probably unlike any other program you may have attended and will benefit you three distinct ways: individual growth, professional development and organizational improvement.

Individual growth
Emotional growth and maturity go hand-in-hand with professional success and opportunities. Just as a senior-level team would, an individual should go through their own SWOT analysis (strengths, weaknesses, opportunities and threats). One way to assist in this process and benchmark yourself against peers in similar positions is to take a deep-rooted, personality-type assessment such as the Caliper Profile. This one-and-a-half-hour online assessment identifies personality traits, opportunities for success and development opportunities, to name just a few.

As an individual who leads the HR function, you must be keenly aware of how you are perceived and how you can work more effectively with others. Other components of an effective assessment include identifying analytical skills that will assist in problem solving, decision making and becoming more strategic within your position.

At the Summit: You will receive a free $295 Caliper profile that confidentially benchmarks you against those in attendance and against other professional positions. The assessment will be assigned just after registration, and both a written report and verbal report will be provided to you confidentially after the event.

Professional development
Networking is one very important aspect to a senior-level HR professional’s position. By building a professional network, you can use your network to identify others who may be dealing with the same issues you are confronting. It is important to nurture these relationships and have a forum to meet others while also letting them know your skill sets and war stories. Oftentimes, it is very difficult to make these connections or find the time to embark on a networking journey. With a network behind your, your bandwidth of support, best practices, experience and potential solution identification increases exponentially.

At the Summit: You will not only network in facilitated roundtable discussions, you will also have an opportunity to post issues you’re facing, or meet with people from the conference who are of interest to you. A networking area will be available Thursday evening, Friday morning and Friday afternoon to aide in easily meeting other senior-level HR professionals.

Organizational improvement
Helping your organization improve directly translates into your professional growth. Creating, refining or re-engineering your corporate HR strategy is the very first step in moving forward. You are able to increase your proficiency in identifying improvement opportunities, not only in your functional area, but operationally and – most importantly – in other departments that contribute directly to the bottom line. You must benchmark your company’s HR practices against other organizations to insure that your costs and practices are in alignment. You must increasingly use new and creative staffing and retention strategies to optimize organizational performance. And lastly, you must be able to use current staffing and naturally-forming groups within your company to build a thriving organization.

At the Summit: You will receive benchmarking surveys and hear from several thought leaders and panelists on strategies to optimize your HR practices for maximum effect, become an employer of choice and identify resources to move your company’s and HR strategy forward.

Tired of “typical” conferences?
As a senior-level professional or someone who leads the HR function, you are probably tired of the following kind of events:

• Talking heads just presenting topic upon topic and attending break-out sessions that frequently results in little learning or benefit from attending.
  
  
• Difficulty in meeting others with similar issues you face on a regular basis.
  
  
• Networking and talking to others is next to impossible given the tight timeframes of the event.
  
  
• Other attendees may have much lower responsibility than you do; thereby not directly benefiting you to want to make connections.
  
  
• Listening to someone speak on a topic with which you personally have more experience.

Employers Group’s HR Executive Summit is different! It is co-sponsored by USC’s Marshall School of Business, who will supply some of the speakers. Keynote speakers will provide insight into strategies you can adopt in your workplace, grow yourself individually and develop more professional connections. We have structured facilitated roundtable discussions on contemporary issues so you can share your experience and needs with others. We have structured networking opportunities for those wanting to make new connections. We give you a platform and opportunity to speak to your experience and help others move forward in their positions. We give you an opportunity to confidentially benchmark yourself against peers in similar positions so that you can move forward in your career.

November 13-14, 2008
This is a two-day program that you should not miss. Coinciding, but unrelated to the Orange County WELU, on November 12, the HR Executive Summit will be held November 13-14 at the Costa Mesa Bristol Street Hilton (within 3 miles of the Orange County airport). We have specially discounted room rates available by calling 714.438.4915 and giving the group code EMG. Early-bird registration now being taken at www.employersgroup.com/hrsummit2008.

What HR should Really be Like

Note to Reader: The article below by Edward E. Lawler III previously appeared in Wall Street Journal. It is a preview on what you will hear from Professor Lawler at Employers Group’s HR Executive Summit on November 13-14.

Imagine a company in which the human resources department has great talent and technology and advises top executives on business strategy and organizational effectiveness. It has a say in big decisions and is a critical career stopping point for anyone who aspires to senior management.

Sound like a foreign concept?

That’s what an HR department should look like in a company that considers its work force to be its most important asset—a major source of competitive advantage.

While most companies say they value human capital, in reality, few are run that way. They may have systems in place for hiring talented people, but their organizational structures aren’t designed to develop, motivate and retain the best ones. And the group with the expertise to help the organization better manage and utilize people—the human-resources department—often is too mired in administrative tasks to tackle higher-value work.

In a company built to leverage human capital, the HR staff would spend less time processing benefits requests and more time being the expert resource on the state of the organization’s work force and its ability to perform.

That has been difficult in the past, because many of the administrative duties assigned to HR involve a lot of detail and complexity that make them labor intensive.

But now, Web-based applications, many of which lend themselves to self-service, offer a solution. Employees can visit a Web site to sign up for benefits, change their addresses, enroll in training programs, search for jobs, assess their knowledge and set goals and objectives for the year. Managers can use them to give out bonuses and raises, appraise performance, transfer employees and find internal candidates to fill open positions.

What’s more, many companies offer HR outsourcing services, and a number of large companies have entered into long-term contracts to outsource multiple HR processes to a single vendor. I believe that for most companies, outsourcing is the right way to handle HR administration. Not only does it release HR professionals from a set of no-win activities, it frees them up for work that is of greater benefit to the organization.

Of course, getting out from under these administrative tasks solves only half the problem; HR departments have to use their newfound freedom to help get the most out of an organization’s talent. Here are three areas where HR professionals could play a key role to accomplish just this:

Fostering leadership: The HR department can help managers at all levels become better leaders by teaching them how to improve their communications skills, set expectations for their staffs and motivate people.

Managers uncomfortable with some of the interpersonal aspects of the employee-evaluation process, for example, may benefit from HR’s in-depth knowledge about how to give feedback and explain how goal achievement relates to rewards. Others managers may need help becoming more approachable and open to feedback so as to minimize the distance between themselves and the people they lead.

Assisting the board: A second important role for the HR group is to become the corporate board’s expert resource on the condition and utilization of the work force. Directors can use this type of knowledge to evaluate senior managers and do succession planning, assess organizational design and effectiveness, and make strategy decisions such as whether the organization has the people with the right skills to start a new line of business.

HR executives, however, are rarely on boards and don’t consistently attend board meetings like their counterparts in finance and accounting. Instead of using HR, board members often say they rely upon their chief executive officers for HR expertise. While there is no doubt that many CEOs have some understanding of the human-capital issues that corporations face, they rarely have the kind of in-depth knowledge HR professionals bring to the table. Therefore, I believe companies focused on human capital should have at least two HR experts on their boards.

Assessing the workforce: A third potential role for HR is to spearhead efforts to develop a human-capital information system to measure things like the skills and competencies of the work force, its performance in critical areas and its cost to the organization. The starting point for any human-capital information system should be information about individual employees: What skills do they have, and how well are they being used in their current assignments?

HR professionals are the best positioned within the organization to determine what things need to be measured—to what degree individuals are motivated to perform their jobs, for instance—and who in the company needs the data.

When it comes to what the HR department should do, some companies are close, but none has it exactly right. One thing is for sure: In an organization that wants talent to be its source of competitive advantage, the HR department simply can’t be the stepchild it usually is.