Is 2009 the Year of the Union?

With a seemingly strong majority of “labor friendly” politicians in both Houses of Congress and a new president in the White House, organized labor finds itself in its best position in decades to launch its recovery plan. To accomplish this, unions will rely upon legislation they hope will reverse a 50-plus year decline in union representation from a high of nearly 35% in the private sector in the 1950s to just 7.5% at the end of 2007.

Will EFCA pass?
Organized labor delivered in the 2008 election with both money and boots on the ground. It has made passage of EFCA its highest priority. Three months ago, many predicted that EFCA would sail through if Obama won and the Democrats achieved a filibuster-proof majority in the Senate.

EFCA passed the House of Representatives in 2007. It should easily clear the House again. President Obama, an EFCA Senate sponsor, has said he would sign the EFCA. That leaves the Senate. As of this writing, it appears that Democrats and Independents will have a 59 to 41 majority in the Senate, close to being able to close a filibuster, but certainly not a sure thing.

We could fill this entire newsletter with speculation on what might happen in the first 100 days of the Obama administration. The world economic crisis has made an already complex situation far more complicated. Is this politically the right time to try to push through legislation that Bernard Marcus, co-founder of Home Depot, has said “will make the United States uncompetitive in the global market and ship millions of jobs overseas?” Some speculate that senators who sponsored the bill in prior congressional sessions did so knowing that it would be blocked by a Republican filibuster or a Bush presidential veto. Perhaps some of these senators would not be so enthusiastic knowing that it could actually pass.

Given Obama’s ability to make critical appointments to administrative posts – Obama has appointed Wilma Leibman, a long-time pro-union member, to chair the NLRB – there are still three vacancies on the five-member NLRB. It appears his strategy may be not to push forward with the EFCA at this time, but to enact administrative changes to the NLRB procedures that would tilt the process in favor of organized labor. Either way, change is coming that will give organized labor a better chance at organizing workers and negotiating first contracts.

Setting the stage
No organization or industry is exempt from the natural laws of economic survival. Power, influence and, ultimately, success at achieving organizational goals are dependent upon generating growth. Stagnation is typically followed by consolidation and decline. For validation, we need only to look at today’s headlines. Organized labor is no more resistant to Darwinian market forces than General Motors.

The road to success for any organization is a deceptively simple two-step process:

1. Identify prospects.
2. Convert prospects into paying customers. (For unions, this means dues- paying members.)

Certainly, organized labor continues to identify new prospects. Witness the number of high-profile corporate campaigns against companies like Wal-Mart, Smithfield Foods and Cintas. While there has been no shortage of prospects, the decline of union representation from 1 in 3 American workers to less than 1 in 12 clearly demonstrates that organized labor has failed the second and most crucial step, converting prospects into dues-paying members.

If you have never imagined a union organizer could to organize your employees, the changes that are on labor’s legislative agenda, if passed, would be true game changers. “Natural immunities” like workforce size, family atmosphere, market niche or geographic location that may have made union organizing irrelevant to you in the past could be stripped away if the hoped-for changes are enacted.

Indeed, on January 7, 2009, Service Employees International Union (SEIU) Secretary Treasurer Anna Burger announced that SEIU would commit one-third of its operating budget, approximately $50 million, to organizing new members. Before we discuss these potential new changes, let us take a quick look at the growth and decline of unions in the United States since 1935.

The National Labor Relations Act
Prior to the passage of the National Labor Relations Act (NLRA) in 1935, there was no formal mechanism for a union to be certified as the exclusive bargaining representative of a group of employees. Recall the scratchy black-and-white newsreels from the early 1930’s of Chicago rail workers battling horse-mounted Pinkerton guards. Clearly, the country was tearing itself apart. A peaceful method for employees in the private sector to determine whether or not they wished to be represented by a union had to be found.

The answer was to establish the secret-ballot election process. The NLRA created the National Labor Relations Board (NLRB) to implement and enforce the new law. Two other key provisions in this law should be noted:

• Section 8 (D) – requires employers and unions to bargain in good faith, but specifically states that neither party is required to make a concession or agree to the other’s proposal.
  
  
• Section 8 (C) – permits employers and unions to express views, arguments or opinions provided that such expressions contain no threat of reprisal or force or promise of benefit. (Note: The NLRB does allow unions to make promises in the belief that employees understand that the union is not capable of delivering on those promises.)

Increase and decline of union-represented employees
Unions thrived during the 20 to 30 years following the passage of the NLRA, eventually growing to represent one third of the American workforce. This level of unionization was achieved in the post-World War II era when much of American heavy industry enjoyed near-monopoly conditions in the world economy. By the 1960s, however, the rebuilding of the Japanese and European industrial bases began to show the first signs of the coming global economy. Increased competition, both national and international, would soon begin to take a heavy toll on America’s unionized industries.

For example, in 1980, Congress deregulated the trucking industry. Prior to deregulation, hundreds of Teamster-represented trucking companies charged the same tariff, and all paid their employees virtually the same compensation. Deregulation allowed non-union trucking companies to charge lower rates. Unionized trucking companies signatory to the Teamster National Master Freight Agreement quickly began to lose market share to non-union operators. From 1980 to 2003 Teamster membership declined from 2.1 million to 1.3 million members.

Meanwhile, with organized labor’s support, Congress and the States have enacted dozens of new laws from Fair Labor Standards to Workers Compensation and Unemployment to ERISA, and mandated leaves giving all American workers significant rights and protections without union membership.

Other changes mirrored societal changes. As a customer-driven economy, companies learned, some more quickly than others, that “job one” was meeting customer needs. Enlightened employers realized that they had to provide the same level of customer service to their most important internal customers, their employees, as they provided to their external customers.

Add the rise of voluntary arbitration procedures and “wrongful termination” lawsuits that dramatically reduced “at-will” terminations that might be perceived as unjust or unfair, unions lost a key rallying point – protection against unreasonable treatment and unjustified discipline.

There were also changes within the labor movement itself. While there are certainly many honest union officials, nearly every major union has had its share of those who have either been accused or convicted of having unlawfully enriched themselves at the expense of the membership. In today’s information age, our more sophisticated workforces have much freer access to news of the corruption within organized labor.

Faced with this downward spiral, organized labor realized it needed to implement a rescue plan before its power, influence and relevance deteriorated further.

Organized labor’s rescue plan, aka the Employee Free Choice Act
The first step in converting prospects to dues-paying members is to become the employees’ exclusive bargaining representative. While a union that successfully solicits signed authorization cards from a majority of the employees in an appropriate bargaining unit may ask for a “card check,” an employer typically has a right to refuse the card check and demand that the union file for an NLRB-conducted secret ballot election.

Starting about 20 years ago, employers, primarily in healthcare and hospitality, who refused the card check, found themselves subject to a union “corporate campaign.” The “corporate campaign” is a coordinated effort to destroy the reputation and business interests of the employer to compel the employer to agree to the card check. This approach did produce substantial success in the healthcare and hospitality sectors. Encouraged by this success, organized labor is now determined to replace the NLRB secret-ballot process with a mandatory card-check provision.

The Employee Free Choice Act (EFCA), first introduced in 2003, and re-introduced in the next two Congressional sessions, would not only bypass the secret-ballot election, but help convert prospects into dues-paying customers by ensuring that unions could always achieve a first contract.

According to the most recent data available from the Federal Mediation and Conciliation Service (FY 2004 Annual Report), unions were only able to get signed contracts in 55.2% of negotiations for an initial contract. In its current form, the EFCA would mandate binding arbitration, empowering the arbitrator to dictate a legally binding contract effective for two years if the union and the company were unable to reach agreement in 120 days.

Under EFCA, Section 8 (C) of the National Labor Relations Act (discussed above) loses its significance, since the campaign period, currently approximately 42 days from filing of the petition to the election, disappears. Organizing could be kept totally underground until a majority of cards were signed, effectively depriving employees of ever hearing the “other side” of the story.

Should the employer detect organizing activity and attempt to communicate with its employees, the peril of doing so could be a civil fine as high as $20,000 per violation if the employer is found to have improperly discussed the matter with its employees.

Under EFCA, an employee found to have been terminated for union activities rather than legitimate performance issues may be ordered reinstated and awarded triple back pay. While the reinstatement remedy exists today, back pay is limited to actual lost earnings plus interest if a termination is found to be unlawful. EFCA also calls for increased use of federal court injunctions that could order reinstatement of terminated employees or other extreme remedies before a case is fully adjudicated.

Clearly, EFCA would bring revolutionary change to the organizing process. As discussed above, whether EFCA will pass and in what form are the big questions. Employers Group, along with the author’s firm, will be tracking this and other relevant legislation as we move through these very unique times.

Is “Big Brother” Watching?
The advisability of GPS devices to track employees

The use of Global Positioning System (GPS) technology by employers to track employees is becoming more common, which brings up both potential concerns and opportunities for employers. GPS technology can be inside of cell phones and laptops, and external GPS hardware is also available.

Initially, employers used this technology to track outside sales, deliverers, drivers, security positions, field technicians or other similar positions. Today, with technology being so prevalent, organizations are routinely requiring the use of cell phones and laptops. A recent study (Pew Research) indicates that 93% of employees owned cell phones in 2008 with expectations of increases in 2009.

Management has become increasingly savvy regarding technology for meeting organizational goals, and usually requires employee use. When it comes to GPS technology, however, managers face a number of challenges that if appropriately dealt with, can also lead to further opportunities.

Privacy
There are a number of reported incidents where employers using GPS to track employees while away from the office, consequently became aware of an employee’s extramarital affairs; alcohol and drug rehabilitation care; or employees who ran personal errands while on the clock. While this may be fascinating information for employers, it would be prudent to be cautious of impinging on employee privacy rights.

State and federal laws protect employees’ right to privacy where they have a reasonable expectation of such protection. In California, employers are restricted from taking action against employees because of their private off-duty and/or on-duty activities. (Please consult with an attorney for legal advice and contact a Helpline Consultant for further information.)

For example, employees may expect that their whereabouts are private even while on the clock. What can you do? Set a policy that clearly draws out the circumstances under which the employee will or will not be tracked by GPS; who will have access to this information; under what circumstances the employee can disable the GPS tracking; and how their performance or behavior will be evaluated in regards to the monitored information. Finally, be sure to have employees acknowledge that they have been trained properly and received the policy and expectations.

Advantages for management:

• Readily (and knowingly) monitor workforce from a distance
• Develop cost-saving efficiencies
• Quickly adapt to changes and opportunities

Performance, attendance, and negligent hiring
Monitoring employee activities via GPS tracking may present knowledge that an employee is not performing up to expectations. Discovering that a driver who should use 15 minutes for a routine delivery is actually taking one hour and deviating from the requisite route is one example.

Just as you would for any possible policy violation, an employer should promptly and thoroughly investigate these circumstances. An investigation should also include talking to the employee. Do not rely solely on the data from the GPS monitoring. The employee may make you aware that the data is inaccurate. However, the data collected may be used to support the investigation. Remember that with any new technology, the accuracy of the collected data may not be 100% reliable.

Advantages for management:

• Ability to monitor performance in real time
• Curb passive or neglectful management practices
• Proactively deter abusive behavior
• A built-in trust factor earlier on
• Easier to coach by objectives
• Training opportunities easier to recognize

While advantages are pointed out above, disadvantages could also be present. GPS monitoring may indicate, or be proof of evidence, in negligent supervisory claims. These claims may include instances where a supervisor is aware (or should have been) that an employee is a risk to themselves, to the company or a third party (other employees, customers, or the public).
A GPS could depict, for example, one of these possible scenarios: a deliverer prone to driving above the speed limit; a sales person who is involved in numerous accidents, who is later discovered to have a disability that restricts his/her driving privileges; a field technician with a prior “lewd act with a minor” conviction, only discovered after a local school complains to police that a “strange, unauthorized employer (yours) vehicle” is on campus.

While these types of scenarios create an obligation for the employer to act upon the information immediately, employers who do not put preventative measures in place, such as a comprehensive policy and training, will most likely be held strictly liable for future claims in this regard. As a best practice, establish a business purpose policy regarding management of GPS monitoring. Establish a policy specifying the method of tracking, length of storing, and safekeeping of this data. Train management and employees on the established policy and practice.

Wage and hour
In California, the Brinker Restaurant Corp. v. Superior Court, No. D049331 (Cal. Ct. App. Jul. 22, 2008) case, the court held that off-the-clock work is prohibited by employers when the employer knew or should have known about it. (The Brinker case provides guidance regarding employer obligations concerning rest and meal breaks. It is important to note that in this case, a petition for review before the California Supreme Court was filed.)

It is likely that GPS tracking will show evidence that an employer knew of off-the-clock work, such as through the common practice of recordkeeping of the tracking data. Thus, employers should provide management training and periodic review of the current wage and hour laws, as well as recordkeeping requirements. Employees should never be allowed to work off-the-clock. Employees should be informed of your time and attendance policies and expectations. If you become aware that an employee has worked off the clock PAY THEM promptly. Based on the circumstances surrounding the off-the-clock work, a review of the policy, an audit of the position, or discipline of the employee and/or their supervisor may be necessary.

Advantages for management:

• The tracking data supports accuracy of audits.
• Assists in reducing nonessential hours worked.
• Enables effective planning for production or increases in business.

Discrimination
Employees who are within any protected class or status may not be noticeably apparent to you. If an employee files a discrimination claim against an employer, evidence must show that the employee was part of a protected group to support a discrimination claim. Accordingly, GPS monitoring of employees could reflect that they are meeting with union organizers; stopping off at an Alcoholics Anonymous meeting during lunch; or visiting their urologist. This knowledge could support a claim of discrimination, where the monitoring may provide proof of such information.

Additionally, an employer still must prove that a monitored employee consented to GPS tracking at the time and place of the “lleged invasion of privacy. As a best practice, remove an employee’s reasonable expectation of privacy by informing them why, when, where and how they will be monitored. Tell them how, and under what circumstances, GPS monitoring may be disabled. Have the employee acknowledge receipt and orientation of this communication. Take this opportunity to reinforce your policy against discrimination in the workplace.

“TOP 10” advice about GPS monitoring:

1. Not be on employee’s own time
2. Not done covertly
3. Not with employee’s own property
4. Have employee’s consent to monitoring while on duty
5. Be periodically tested for accuracy
6. Limited to legitimate business reasons
7. Adopt and enforce comprehensive policy/procedure
8. Information should be provided on a need-to-know basis
9. Monitor work only
10. Be used for management, not punishment

How to make an OFCCP Audit a Positive One

Employers tend to view government agencies as their foes during audits and investigations into their equal employment practices. The truth of the matter is that employers’ worst enemy in an investigation could be themselves. There is a long list of measures companies can take before and during an audit or investigation that can reduce the chance of an unhappy ending.

Lay down the ground rules
Employers need to know what documents are being given to the investigating agency and what is contained in those documents. It is prudent that employers not make the mistake of letting the auditors control the audit. There were some instances when employers told auditors from the Labor Departments Office of Federal Contract Compliance Programs (OFCCP) to simply “help yourselves” to the information needed from the company’s personnel files. You should not let them have free run of your premises when they come to do an audit. An audit is not a fishing expedition. The investigator should not be given free access to your premises and your files.

A better approach involves displaying everything the investigator needs, knowing what is in those documents, and preparing a separate office in which the investigator can perform his or her duties. Investigators should also be prevented from roaming the hallways and questioning random employees.

Always check the math
Investigations often become entangled in debates over the agency’s analysis of the firm’s internal data. Before wasting a lot of time debating the outcome, the employer should check the analysis. In two out of three cases, an erroneous calculation is made or the input data is configured incorrectly.

Maintain a “brag book”
HR should develop a book highlighting the firm’s formal and informal affirmative accomplishments (e.g., Good Faith Efforts). Such a book might include awards, news clippings, and memos discussing the achievement of important affirmative action goals. A brag book demonstrates a commitment to such issues and makes a good impression on auditors.

Adopt an “all or nothing” approach
A particular allegation could show up in multiple forums due to overlapping jurisdiction between federal, state, and local equal employment agencies. In settling a single problem, make sure the allegations cannot re-emerge with another agency.

Create transparent promotion and hiring processes
Employers should establish job posting systems that offer the whole employee population options for bidding on open positions. While such systems can be cumbersome, they prevent agency complaints and private litigation asserting that promotions and hiring are secretive, unfair, or discriminatory.

Develop a cooperative working relationship
There is no reason to antagonize investigators. While an audit can be uncomfortable, many issues can be cleared up through flexibility, cooperation, and accommodation.

Get the CEO involved
Employers should give agency investigators access to the organization’s CEO during a review. Interaction with the top person in the organization generally makes a good impression, especially when it is clear the executive is committed to the principles of equal employment. In most cases, the chief executive understands the importance of the issues and knows how to sell the organization’s values, whether the audience is a group of stockholders, prospective clients, or government investigators.

The OFCCP wants to see if this CEO really cares or not. The fact that he/she may not be precise about something is not going to hurt you. They want to know whether he/she has a clue about affirmative action, about the advancement of women and minorities within the company.

Connecting the Dots:
HRD Planning at O’Melveny & Myers LLP

Employers Group expert Organizational Development team recently partnered with internationally renowned law firm O’Melveny & Myers LLP in creating a framework for a three-year Human Resources Development Plan (HRDP).

O’Melveny & Myers LLP has been named to The American Lawyer’s 2008 A-List, which recognizes the nation’s most elite law firms. In its debut appearance on the list of 20 firms judged best at balancing a thriving business with their obligations to the profession, O’Melveny ranks 16th. The American Lawyer describes this year’s pool as those corporations that “best embody what it means to be a success in the legal community,” while stressing that it has become increasingly difficult for newcomers to land one of the 20 coveted spots. Although the 2007 rankings featured seven new firms, the 2008 A-List includes just three. O’Melveny & Myers is the highest-ranked newcomer on this year’s list. This article showcases their forward-thinking project.

What is Human Resources Development Planning? There are numerous explanations in print. The primary focus has been to make sure future workforce demands are identified and accounted for. In Swanson and Holton’s textbook Foundations of Human Resource Development, HRD is defined as “a process for developing and unleashing human expertise through organization development and personnel training and development for the purpose of improving performance.” Other literature regards HRD as HR development systems containing three components: individual training and development, career development and organization development. The ultimate goal is to increase organizational effectiveness and efficiency through performance improvement. What is not mentioned in these definitions is the all-encompassing links to business strategy. Employers Group took a holistic approach with O’Melveny & Myers HRD, and also linked it with their business goals.

The big picture
This project looked at the following main areas: recruiting, selection, career development, performance management, succession planning, training and development, and knowledge management. We asked a series of questions under four sections: current internal practices, internal benchmark, external best practices, and business needs analysis. We considered these series of questions for each of the seven parts. This data painted a whole picture of O’Melveny & Myers’ HRD needs, while taking into account their business needs.

Sometimes we do not take the time to see the big picture. For various reasons, whether it is lack of time or resources, conflicting initiatives or focus on the immediate goal, we create “one-off” programs, such as a new and improved performance management system or recruiting strategy. Although these programs may serve an immediate need or goal, they impact other organizational aspects, such as career development and succession planning. What is the connection with the business’ short-term and long-term goals, strategy and vision?

We took each piece and studied how each interconnects with the other, resolving conflicts and enhancing outcomes along the way. For example, how could career development link to the selection process and training and development? Selection encompasses not only choosing the best candidate for an open position; it also takes into account all the necessary job competencies to be successful in the position and starts with the job analysis. The career development plan incorporates the selection information, so career paths can be created. Employees need to know what competencies are essential to move into other roles at O’Melveny & Myers. With respect to training and development, the core link is job competencies, but there are many others. The competencies needed for various career potential paths should be addressed in the training curriculum.

A collaborative effort
This collaborative effort could not have been manifested if it were not for the forward-thinking leadership at O’Melveny & Myers. Professionals such as Director of Human Resources, Scott Setterberg, and Manager of Staff Training, Shonette Gaston, truly understand the value of “global” organizational development. At O’Melveny & Myers, excellence, leadership, and citizenship are key values, which guide them in every regard, including their commitment to their employees’ careers. By focusing on talent development, they strive to promote and secure a standard of excellence and provide ample opportunities for all employees. They continually explore ways to distinguish themselves through talent-development programs that are as cutting-edge as the work they do.

At Employers Group, we help our members align HR operations with overriding strategic business goals, reducing costs and increasing performance. Our consultants have extensive hands-on strategy, operational, organizational development, performance management and human resources management expertise. This capability makes us uniquely qualified to advise our clients with relevant, real-world experience and practical solutions for their most critical issues.

Voluntary Quits Still Happen
How does this affect your UI?

During this time of an economic recession and predicted layoffs, it is hard to imagine that there are some employees who may choose to move on. Even in this period of instability, they nevertheless may have a valid reason for leaving. Perhaps a spouse was laid off and obtains a job out of state; thus, the employee would leave to keep the family together. When employees leave of their own volition, the question of entitlement to unemployment benefits comes up.

In a previous newsletter, the subject of discharges based on misconduct was addressed. This article looks at the other side of separation – voluntary quits. Many people think if someone quits a job he/she will not be able to collect unemployment insurance benefits. This is not always the case. When determining if good cause for quitting exists the “reasonable person” concept applies. That is, “…when the facts disclose a real, substantial, and compelling reason for leaving employment of such nature as would cause a reasonable person genuinely desirous of retaining employment to take similar action….” then the person might be justified in leaving the job.

The reason for the quit does not have to arise out of the work itself or involve the employer. Good cause for leaving is decided based on the facts at the time of leaving and whether there is a timely connection between the reasons stated for leaving and the actual departure from the workplace. Without the presence of this connection, the good cause for leaving might be considered negated.

Some examples of voluntary quits without good cause are going to school when it is not required to perform the work, to look for another job, to become self employed, leaving in anticipation of discharge, general dissatisfaction, failure to request a leave of absence, not returning from a leave or failing to request an extension of a leave when these options are available.

There are situations where good cause to leave employment exists, but is negated by the actions of the employee. The employee; leaves work prior to seeking remedy to a problem; fails to advise the employer of a problem and give the employer time to correct the situation, fail to seek or accept a leave of absence when it might resolve the situation, or to seek a transfer to other work or a different work location.

There is probably good cause to quit when there is a lack of transportation or the employer moves to a location outside the normal commuting distance. The “normal” driving distance can be difficult to determine. In some cases, travel time in excess of an hour may be good cause to quit. However, in Zorrero, infra, a Court of Appeal ruled it was not unreasonable to require a worker to travel two hours one way.

Part of the test is the employee’s wages. The higher the pay, the greater the burden on the employee to prove there was a good reason to leave the employment. Good cause also exists when there is a substantial reduction in wages or major change in assigned duties, on doctor’s advice to change the type of work engaged in, or the work constitutes a risk to health, safety, morals or civil rights. These examples might pertain to an employee who survived a company layoff, but his/her responsibilities and duties increased substantially to fill the void of those who were laid off, or the company reduced his/her hours and wages because of economics.

There are also “win-win” situations where the employee is granted unemployment insurance benefits, but the employer’s reserve account is not charged for any benefits paid. This occurs when the employee quits to escape a violent or abusive domestic situation, to relocate in order to keep the family unit together, to care for an immediate family member, to follow a spouse/significant other to a new location when a transfer is not available or the commute is impractical.

Even in a voluntary quit situation, it is imperative to protect the company by asking the employee the reason for the quit, to offer solutions where applicable, and to document everything that transpires. As with any situation, the old adage “if it is not written down it did not happen” applies. Unless the former employee corroborates the employer’s story, a win-win or favorable decision for the employer can turn into a losing situation.

Editor’s note: Please contact Ahmed Younies, Director of Specialty Services, for information about EG’s UI Services. Call 1.800.748.8484, or email ayounies@employersgroup.com.

Determining Exemption Classifications

The most widely available “white collar” overtime exemptions are for the executive, administrative, professional employees or outside salespersons. For California employers, the principal sources of overtime exemptions are the federal Fair Labor Standards Act (FLSA) and its regulations, and California’s Industrial Welfare Commission Orders. Where conflicts exist between the two laws, the higher standard (more difficult to be exempt) applies.

Duties, responsibilities and salary test
White-collar exemptions are determined by using duties, responsibilities, and salary (remuneration) tests. Job titles mean nothing. Salaried status alone is similarly insufficient for exempt status.

Exemption not a choice
Exemption is not a choice of the employee or employer. Even if both parties agree to an exemption classification, overtime will still be owed if the duties, responsibilities and salary tests are not met.

Salary (compensation) requirement
In California, white-collar exempt employees must earn a monthly salary equivalent to no less than two (2) times the state minimum wage for full-time employment – since January 1, 2008, it’s $640 per week. Full-time is defined in Labor Code 515(c) as forty (40) hours per week. Where California and federal minimums differ, the higher standard (rate) applies.

Federal and California Tests
Generally, under federal law, if an employee is highly compensated (paid $100,000 or more per year) and customarily and regularly performs any one or more of the exempt duties of an exempt classification, he/she will be FLSA exempt. An employee may be exempt if paid at least $455 per week and his/her primary duties are the performance of the exempt duties of the classification. Basic FLSA exempt classifications are: Administrative, Executive, Professional, Outside Salesperson, and the hourly paid Computer Professionals. The DOL’s Employment Standards Administration, Wage and Hour Division, maintains a website regarding FLSA exemptions.

California generally requires an exempt employee to be primarily engaged in duties which meet the test of the exemption. “Primarily engaged in” means that more than one-half (1/2) of the employee’s work time must be spent engaged in exempt work. For example, the activities constituting “administrative” exempt work and non-exempt work are construed in the same manner as those appearing in the Code of Federal Regulations.

Additionally included is all work that is directly and closely related to exempt work, and work that is properly viewed as a means for carrying out exempt functions. The work actually performed by the employee during the course of the workweek must, first and foremost, be examined and the amount of time the employee spends on such work, together with the employer’s realistic expectations and the realistic requirements of the job, shall be considered in determining whether the employee satisfies this requirement.

Exempt duties more than 50% of the time
When judging exempt duties and responsibilities, California requires that the work be “primarily” exempt. That is, the work duties must be of an exempt nature more than 50% of the employee’s time. This “more than 50%” rule is actually more restrictive than the new federal regulations requirement, where an employee’s “primary duty” can represent less than 50% of his/her regular work.

Exemptions

Executive exemption
This is the exemption classification for supervisors and managers. The executive exemption requires that the individual be primarily engaged in duties, which meet the test of the exemption. Duties may involve the management of the business or of a customarily recognized department or subdivision. Management duties include hiring, firing, direction, payment, evaluation and discipline. The individual must regularly and customarily direct the work of two or more employees.

Administrative exemption
This exemption classification is, perhaps, the most misapplied. The administrative exemption requires that the employee’s primary duties be office or non-manual and be directly related to management policies of general business operations of the employer. That is, the individual must be involved in “matters of significance.” Regular use of discretion and independent judgment is also required. “Discretion” and “independent judgment” imply independent choice, free of immediate supervision or direction.

California guidelines state that employers often confuse discretion and independent judgment with skills or knowledge. Independent judgment and discretion imply evaluation and comparison of possible options and making a decision, not merely applying knowledge in following prescribed procedures or determining whether specified standards have been met.

Professional exemption
In order to meet this exemption, a person must be licensed or certified by the State of California and be primarily engaged in the practice of: law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting; or in an occupation commonly recognized as a learned or an artistic profession.

A “learned or artistic profession” is one in which an employee is primarily engaged in work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study or work that is original and creative in character in a recognized field of artistic endeavor. The work is also predominantly intellectual and varied. The employee must customarily and regularly exercise discretion and independent judgment in the performance of his/her duties.

Pharmacists and registered nurses are not considered exempt professional employees unless they individually meet the criteria established for exemption as executive or administrative employees.

Outside salesperson exemption
Outside salespersons are exempt in California if the employee is at least 18 and spends more than one-half of his or her time away from the employer’s location selling tangible or intangible items. Federal law requires an outside salesman to have as his/her primary duty: making sales, and obtaining orders. The salesperson must be customarily and regularly engaged “away” from the employer’s place or places of business.

Advance practice nurses exemption
Starting in 2000, certified nurse midwives, certified nurse anesthetists and certified nurse practitioners who are “primarily engaged in performing duties for which certification is required” became exempt from overtime requirements. Advanced practice nurses who are practicing nursing in a position not requiring their certification are not exempt for such non-certified work.

Computer professionals exemption
Hourly paid computer professionals in the software field who are “primarily engaged” in exempt work as specified in the Labor Code, are highly skilled, and are paid not less than $37.94 per hour for all hours worked are exempt from premium overtime pay rates. Alternatively, an annual salary $79,050 may be paid to meet the compensation requirement.

By Matt Bartosiak,
Senior Consultant,
and Jim Kuns, J.D.,
Senior Consultant

Starbucks Application Form Scrutinized

Three applicants for employment at Starbucks claimed, in a class action lawsuit, that they were illegally denied jobs because Starbucks’ application form asked them about minor marijuana convictions, which were more than two years old. The California Court of Appeal, Fourth Dis-trict, found fault with Starbucks’ application form, but determined that the complaining employees hadn’t had any marijuana-related convictions, and weren’t actually harmed. According to the court, in this circumstance California law allows for damages suffered by an applicant for em-ployment, not for any applicant, whether or not they were impacted by a poorly drafted application. See Starbucks Corporation v. Superior Court of Orange County (Erik Lords et al) 2008.

Starbucks uses the same job application form nationwide for store employees. On the first page there is a question which asks: “Have you been convicted of a crime in the last seven (7) years?” If the applicant answers yes, then he/she is asked to list convictions that are a matter of public record. On the other side of the page there are various disclaimers clustered in a densely worded paragraph. Within that paragraph there is a statement indicating:

“CALIFORNIA APPLICANTS ONLY: Applicant may omit any convictions for the possession of marijuana (except for convictions for the possessions of marijuana on school grounds or possession of concentrated cannabis) that are more than two (2) years old, and any information concerning a referral to, and participation in, any pretrial or post trial diversion program.”

Eric Lords, Hon Yeung, and Donald Brown unsuccessfully applied for employment with Starbucks. They filed a class action suit in 2005 representing 135,000 other unsuccessful job applicants. They claimed that the application contains an illegal question about prior marijuana convictions that are more than two years old. They argued that applicants would not see the disclaimer, or wouldn’t want to cross out their answers, or ask for another application. They sought $200 for each failed applicant. The total value of the claim could reach $26 million.

Lords had read the entire application and understood he didn’t have to report a marijuana conviction more than two years old. So, he truthfully answered “No” to the convictions question. He said that he’d never smoked marijuana in his life. He was bringing the lawsuit for the benefit of other people. He claimed no personal stake in the matter. Neither Yeung or Brown had a marijuana conviction either, but both refused to answer the question on the application.

The lower court denied Starbucks’ request for a summary judgment and certified a class of all California applicants who submitted an employment application with the offending convictions question since June 23, 2004. The court also determined that the employer violated the California Labor Code by merely offering an application with the impermissible question.

Later, the Appellate Court pointed out that: “Starbucks raises two obstacles to plaintiffs’ attempts to recover $200 for themselves and the other class members. First, Starbucks argues that the California disclaimer, even if ambiguous, was not ambiguous as to plaintiffs, two of whom testified at their depositions to sharing the same understanding of the application as did Starbucks.

Second, Starbucks argues that none of the plaintiffs are entitled to an automatic $200 recovery because none had any marijuana convictions to disclose. The points are well-taken. …While the wording of the Starbucks application may establish a potential ambiguity in the abstract, there is no evidence that it made any difference in how Lords and Yeung filled out their job applications. There is no evidence that either of them believed that he was being asked to disclose marijuana-related convictions that were more than two years old.”

The court went on to note that employees who had no marijuana convictions to disclose are not members of a legally protected group. The complaining employees are not in the same position as those whose minor drug histories were wrongly revealed on the job applications, or who refused to disclose such offenses in response to the convictions question, and therefore may be entitled to actual damages.

In California, where civil liability is based on a law, the plaintiffs must show that they are actually in the class of persons that the law was intended to protect.

Otherwise “…there would be nothing to stop them from freely roaming throughout the state ‘as knights errant amici searching for deficiencies ... where no harm has been caused them or anyone else as a result...’ …This could create a whole new category of employment – professional job seekers, whose quest is to voluntarily find (and fill out) job applications which they know to be defective solely for the purpose of pursuing litigation. This is not the law in California.”

The court noted that Starbucks’ disclaimer wording was OK, “…but we see significant problems with its placement. Had Starbucks included the California disclaimer immediately following the convictions question, Starbucks would have been entitled to a summary judgment in its favor on the reasonableness of the employment application. …[W]e cannot accept Starbucks’ assurances that this ‘clear and conspicuous’ test is satisfied by its placement of the California disclaimer at the very end of a 346-word paragraph, with a U.S. disclaimer, followed by a host of irrelevant provisions from states like Maryland and Massachusetts. Starbucks emphasizes that its California disclaimer is placed in boldface type, but so are the U.S., Maryland, and Massachusetts disclaimers. Any value to be gained by emphasis is submerged in a veritable sea of boldface type.”

The court found in favor of Starbucks primarily because the complaining employees did not suffer damage because of the application questions. The court did, however, caution that “Intentional violations of [Labor Code] sections 432.7 and 432.8 are misdemeanors, subject not only to fines, and to statutory penalties of treble actual damages, or $500, whichever is greater. (§ 432.7, subd. (c).)

“The specter of potential criminal exposure sufficiently deters miscreant employers from improperly intruding into job applicants’ protected zones of privacy.”

Recession-Proof Sales Plans

As a soft economy leads to lower sales opportunities and reduced earnings potential for sales personnel, companies may need to adjust their sales plans to match the lowered sales levels that are being forecasted for 2009. Such a proactive initiative will help companies better manage their costs and optimize their commission or incentive expenditures.

During times of economic growth, an effective and updated sales compensation plan is critical. In times of economic contraction, the need is even more essential. As the basic premise of an effective sales compensation program is to help companies achieve their business objectives, their sales plan should be evaluated to ensure that the stated objectives are relevant and aligned to the sales cycle and the volume that sales personnel face in today’s marketplace.

For the plan to succeed, it should match the reward or financial self-interest of salespeople to the organization’s marketing or service objectives. Plans that “incentivize” the wrong behavior, or plans where the potential incentive is not properly aligned, may undermine the organization’s ability to address its key objectives, including sales goals, marketing objectives, etc. Also, an unclear, unfocused sales plan can add to a company’s sales woes as star sales agents often move on to seek better earning opportunities.

So how do you know if your sales compensation plan is delivering the desired results? A financial and sales objective audit can help.

Does your sales plan measure up?
Depending on your industry, and based on estimated sales forecasts for 2009, most industry sectors can expect a 10 to 20% drop in sales. As such, sales plans and other systems used to pay sales personnel should be evaluated to determine if the bonus or incentive payouts can meet minimum payout thresholds. Evaluating the plan’s threshold is especially important for commission plans, as often the commission split is heavily weighted on commission with a low base, usually 30-40% of the total potential earnings.

When to modify the plan
If the plan severely limits the earnings potential of the sales force, should the company modify the makeup of the plan? Most sales compensation experts will agree that before a plan is altered, companies should reexamine the plan’s underlying objectives and priorities. During this exercise, companies should seek the input and involvement of salespeople in selecting compensation components that will both support the company's strategic marketing objectives and give salespeople an incentive to perform.

For example, sales incentive plans that reward market growth, new accounts, high margin transactions, etc., may not be feasible in times of recession. Companies may evaluate whether it may be practical to modify the plan and “incentivize” the sales force to maintain existing accounts and for a higher volume sales with lower profit margins.

Once the objectives have been selected, the next step is to examine whether the current mix of base and incentives is: (a) aligned to the plan’s objectives; (b) the potential target is reasonable; and (c) if the plan’s potential payout and costs are within the company’s industry standards.

Determine fixed and variable pay
Determining the proper balance between fixed and variable pay is a delicate task. The compensation mix of base and incentives and associated levels of risk should be a balance that motivates salespeople while supporting the existing or revised key strategic marketing objectives.

These are some of the key factors that companies should examine as they try to obtain the optimum compensation mix:

• Competitive pay standards within the industry: To determine potential payouts, companies should consult with reliable surveys to determine if the potential pay amounts are in line with their competitors. It is critical that in selecting the sources, companies seek reports that outline detailed information based on plan design, industry, and sales volume.

In deciding the payout mix, companies must remember the basic goal of incentive pay: the potential payout is meant to put part of a salesperson’s earnings at risk, while offering the sales representative the opportunity for greater rewards In today’s tough economic times, the strategy may be slightly altered to pay salespeople a higher percentage of a fixed income and requiring them to perform non-sales tasks, such as training and providing service to existing customers, etc.

• Alternative incentives: Often sales plans have a variety of features that allow one-time bonuses to be earned, such as gifts, time off with pay, contest prizes, and a variety of other inducements. If the basic plan is modified, companies may use alternative incentive programs to “make up” potential lost earnings, while still providing strong incentive to achieve sales opportunities. Quite often companies may opt to retool their sales force with a variety of selling tools, including laptop computers, trips with clients, etc. While cash incentives are strong motivators, non-cash incentives – achievement awards and other types of recognition programs – give salespeople a motivational boost that cash will not.

Timing the payout
In reviewing the plan, companies may also consider the timing of the payout. Generally, the timing and/or frequency in which incentives are paid is a function of the length of the sales cycle, the natural stages of the sales process, and fiscal considerations – cash flow requirements, etc. It is generally recommended that payouts be close to the sales so the sales person will achieve his/her maximum motivation impact.

However, as companies struggle with cash flow, or long sales cycles, payout from incentive plans may be staggered and paid in stages, or be made contingent upon receipt of payment from the customer.

Communicate the plan
Whether the plan is modified or maintained, companies should take the necessary training steps and outline the company’s sales goals. The company’s sales force must clearly understand how the compensation plan works, the rationale behind its design, performance goals, and what level of effort is required to achieve performance goals. Unless all sales representatives understand and embrace the compensation plan, the plan will be powerless to motivate the sales force to meet company objectives.

By Juan Garcia,
Director of Research

Learn from President Obama for Creating Your Team

As an executive coach, I often get questions on how to manage and motivate a team, or how to get better-quality work from the group effort. Having the right people on the team is the important first step in this process. Watching the way then-President-Elect Obama put together and announced the members of his future team provided some good examples of how to select team members (regardless of politics). Here are some things I noticed.

Team of rivals
First, as President-Elect, President Obama said he wanted a “Team of Rivals,” similar to the team President Lincoln put together – a team of people who have strong opinions and don’t always agree with each other. When asked how he could keep this “team of rivals” from becoming a “clash of rivals,” he responded very clearly that he expects members of the team to support his policies and vision; those are his.

With this statement, he demonstrated the first trait of an effective team leader: a clear vision. He also articulated that vision clearly and consistently, another important trait of leadership.

To ensure that your team is successful, you have to explain clearly what the task or goal is: Create a new product? Maintain the organizational culture? Determine a new strategy? And you have to tie the team’s work back to them, or to the organization’s goal, to frequently remind everyone of why they are doing this work. Without knowing clearly what they are expected to accomplish, they will always “fail,” no matter how much they actually succeed in their tasks.

Conflict competent*
Second, the President said that he nominated people who have strong opinions and voiced them clearly, another trait of leadership: being “conflict competent.” By encouraging disagreement, the President is allowing for that clash of creativity that comes from thorough debate and exploration, and ultimately results in stronger, more effective decisions. Considering that the people he appointed all have considerable experience at negotiating and collaborating, as well as competing fiercely, they probably all know how to dissent and compromise.

A survey in Business Week reported that the one quality employees wanted in managers was the ability to resolve conflicts quickly. When he was the President-Elect, and now as the President, Obama is known for not putting up with a lot of “drama,” so he can probably manage the disagreements and not let them get out of hand.

Highlight teams rather than individuals
Third, President Obama announced members of teams and the people who will hold positions on the team, rather than announcing individual appointments to particular positions. In the past, presidents-elect have mostly introduced members of the new cabinet one person at a time, generally starting with the most equal among equals, the Secretary of State.

In this case, as the President-Elect, he introduced his teams for certain areas of government, like the economic team and the national security team, rather than a random list of individuals. Interestingly, he introduced the economic team first, indicating the importance of the current issues. The national security team, including the Secretary of State, was second to be announced.

Assign individual positions to teams
Fourth, it is interesting to notice what positions are assigned to what teams. (As of this writing, there were more teams and positions to be announced, so these may be interim organizational structures.) The national security team includes the Attorney General (Department of Justice) and the representative to the United Nations, which has been elevated to a cabinet-level appointment again, along with the Secretaries of State, Defense, Homeland Security, and others.

Consider team dynamics
Fifth, the people who were appointed mostly know each other, and have worked with each other before. They clearly were asked if they could work together, not just whether they would like a particular position. The team dynamics should be considered, as well as the qualifications of the individual members.

Choose for expertise
Last, the members of the team seem to have been chosen primarily for expertise, not experience in Washington, or contribution to the campaign. Several rival candidates are included in the Cabinet appointments, so not rewarding the opposition doesn’t seem to have mattered all that much. Also, one nominee is a Nobel Laureate in the sciences with no government experience at all, so being an “insider” doesn’t seem to be a requirement either.

This may also reflect the President’s leadership style. Provide expertise and leadership at the top, and let others handle operations. If a Nobel Laureate hasn’t managed a few hundred thousand people before, maybe that’s not the most necessary requirement for the job, or even what he will be expected to do. The emphasis on policy development is clear.

The point is that a team has to work together, and announcing the team as a team implies shared goals, values, and vision, not just shared meeting rooms.

*Author’s note: The term “conflict competent” comes from Becoming a Conflict Competent Leader by Runde and Flanagan, Jossey-Bass publishers, 2007.

Workplace Wellness Programs
Are they too complicated, costly and ineffective?

If you answered “yes,” think again!

It’s the New Year and suddenly we are inundated with diet-food-plan commercials, nutritional supplement information, and amazing gym membership deals. What is irritating to me is that during the months of January and February, I can’t get an elliptical machine at my gym when I want it. That changes in March as all of those New Year’s resolutions to “get healthy” fall by the wayside, and then I get my choice of machines. Good for me – but is it really? Let’s think about this. Isn’t “wellness” something that really affects all of us – and year-round?

As an HR professional, you might have thought about starting some type of wellness program at your company in the past. Many HR professionals think about it, but with all of the other fires to put out and higher items on the priority lists, it may still be just a thought.

Wellness in the workplace can also mean a host of things. When clients talk to me about wellness programs, they consider anything from a full-blown, biometric screen with coaching and objective outcomes testing to making a smoking cessation plan available for employees who want to quit smoking.

Wellness means different things to different companies. Wellness in the workplace refers to the education and activities that a workplace may do to promote healthy lifestyles to employees and their families. These programs may be quite complex or very simple. There are three main strategic reasons to be an advocate of wellness in the workplace.

Decrease healthcare costs
First, wellness helps to decrease healthcare costs. Now, there is a lot of discussion around this. WELCOA, the Wellness Councils of America, indicates that for every dollar spent in wellness, three dollars are saved. But where do you see those savings?

If you are a smaller employer, you may not see those savings directly in your healthcare costs for a few years. However, for every high cholesterol claim that does not turn into a heart attack, you win. For every early diagnosis of diabetes that now becomes a matter of better nutrition and exercise, you win.

In short, you are helping to prevent catastrophic claims at a future point. Also, I use a wellness plan as a point of negotiation for my clients with the insurance carriers. If a client has a wellness program in place, often the carriers will take that into consideration when negotiating renewal rates.

Increase productivity and boost morale
Second, wellness programs also help to increase productivity, and third, they also help boost morale. Healthy employees are at work more often; fewer sick days equals increased productivity. Healthy employees are not having as many accidents at work, which equates to improved workers’ compensation experience. Healthy employees are generally more satisfied employees; there is a direct correlation with morale.

Start with an assessment
Okay, now what? This all sounds good, and yes, something should be done in this area, but who has the time and where do you start? As a true HR Professional, where do you always start? An assessment! Always start with an assessment of your environment and the wellness components that you might currently have. Work with your employee benefits consultant to do a preliminary scan based on that information. Identify a small group of people (4-5) to be responsible for completing this.

Employee survey
Second, survey your employees to get a better understanding of your target audience. Employer’s Group has wonderful surveys available to do this. This will help to get a baseline idea of current health habits and interest areas. This creates buy-in from the employees, and the results can be used for benchmarking at a later date.

Keep it simple!
As I mentioned earlier, wellness programs can be very complex, which can sometimes derail efforts. I recommend creating a program that continues to develop over a period of time. This achieves a couple of things: (1) it keeps it fresh for employees, and (2) it makes it manageable in terms of the resources you might have.

Now, more than ever
In today’s challenging economic times, wellness plans may feel like the last thing on the priority list for you. Layoffs, right-sizing, employee legal actions, etc., are certainly keeping you very busy. If this sounds like you, I challenge you to change your thinking on this. Wellness programs can be a very inexpensive way (free resources are even available) to positively impact your bottom line right now, and more dramatically impact it in the future. They can be incorporated strategically into any organization with great success and positive results.

I encourage you to speak with your employee benefits consultant to find out how they can help you and your company in this area. And if you are one of those that I see at the gym now that I haven’t seen all year, I want to see you in April too! Staying fit and healthy helps all of us.