January 2016 final issue

Volume 6 : Issue 1 TM

www.HRProfessionalsMagazine.com

Top

Fiduciary Errors and Ways to

Employee Benefits Companies

Avoid Them

ACA

Reporting Software Complying with the

Employer Mandate

Susan R.

Meisinger, SHRM-SCP, SPHR, JD

Former President and CEO of SHRM

The GIG

Economy

2016

New Year’s Resolutions for HR

JUST PUT IT ON THE COMPANY CARD…NOBODY WILL NOTICE.

YOU’RE REALLY SHOWING OFF YOUR BEST ASSETS TODAY.

THEY’RE WORRIED ABOUT OVERTIME. I’M JUST WORKING OFF THE CLOCK.

I NEVER WEAR THE SAFETY GOGGLES. THEY LEAVE A MARK.

What you don’t hear can still hurt you.

The things employees say when you’re not around can cause legal troubles for you. Fisher & Phillips provides practical solutions to workplace legal problems. This includes helping you find and fix these kinds of employee issues before they make their way from the water cooler to the courthouse.

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SEATTLE TAMPA WASHINGTON, D.C.

Bringing Human Resources & Management Expertise to You

14% of employees rate social media as a top time waster and influence on productivity

www.HRProfessionalsMagazine.com Editor

Cynthia Y. Thompson, MBA, SHRM-SCP, SPHR Publisher

The Thompson HR Firm, LLC HR Consulting and Employee Development Art Direction

Park Avenue Design Contributing Writers

Bruce E. Buchanan Kelly Campbell William Carmichael Harvey Deutschendorf Ed Fensholt Tom Hayes Brigitte Tubbs-Jones Jennifer Kiesewetter Courtney Leyes Brad Mandacina Susan R. Meisinger Joseph A. Ramsey Clifford Stephan Larry Tolbert Board of Advisors

Austin Baker Jonathan C. Hancock Ross Harris Diane M. Heyman, SPHR John E. Megley III, PhD Terri Murphy Susan Nieman Robert Pipkin Ed Rains Michael R. Ryan, PhD Contact HR Professionals Magazine: To submit a letter to the editor, suggest an idea for an article, notify us of a special event, promotion, announcement, new product or service, or obtain information on becoming a contributor, visit our website at www.hrprofessionalsmagazine. com. We do not accept unsolicited manuscripts or articles.

All manuscripts and photos must be submitted by email to Cynthia@hrprosmagazine.com. Editorial content does not necessarily reflect the opinions of the publisher, nor can the publisher be held responsible for errors.

HR Professionals Magazine is published every month, 12 times a year by the Thompson HR Firm, LLC. Reproduction of any photographs, articles, artwork or copy prepared by the magazine or the contributors is strictly prohibited without prior written permission of the Publisher. All information is deemed to be reliable, but not guaranteed to be accurate, and subject to change without notice. HR Professionals Magazine, its contributors or advertisers within are not responsible for misinformation, misprints, omissions or typographical errors. ©2016 The Thompson HR Firm, LLC | This publication is pledged to the spirit and letter of Equal Opportunity Law. The following is general educational information only. It is not legal advice. You need to consult with legal counsel regarding all employment law matters. This information is subject to change without notice.

Features

4 note from the editor

WEB EXCLUSIVES

9 SHRM Certification – The Future of HR is Here

HTTP://HRProfessionalsMagazine.com /Exclusive

5 Susan R. Meisinger, SHRM-SCP, SPHR, JD

13 Sabatoged Success: The Number One HR Problem You’re Not Thinking About 18 The GIG Economy

28 7 Habits of Leaders Who Inspire Powerful Loyalty

37 Book Look: Business Focused HR: 11 Processes to Drive Results

Employee Benefits

14 ACA Reporting Software/Vendor Setup – What’s With These Questions?

16 Common Fiduciary Errors and Ways to Avoid Them 20 A New Year and a New Strategy?

22 Top Employee Benefits Companies

32 Supreme Court Watch – Recovery of Payment When the Funds Have Been Spent

Employment Law

10 5 New Year’s Resolutions to Prevent an Employer’s “Auld Lan-xiety” in 2016

Next Issue Top Companies in Payroll and HRIS Technology– Deadline to submit articles and ads is January 10

24 Three Strikes You are Out – Except When the Impact of Selection Procedures is Disparate 26 Evaluating Evaluations

30 McDonald’s to Pay $355K in Penalties

31 Bass Berry Sims Labor Talk: An Employment Law Update on November 17 34 The Impact of Social Media in the Workplace

Industry News

6 Preview of TNSHRM Strategic Leadership Conference April 8 in Nashville 7 Preview of ARSHRM State Conference & Expo April 6-8 in Rogers

8 Preview TNSHRM State Conference September 14-16 in Memphis

28 Highlights of HRO Partners Holiday Breakfast 33 SHRM-Memphis Mock Trial

35 Highlights of MBA | SHRM-Memphis Seminar 38 Highlights of SHRM-Memphis Holiday Social

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a note from the Editor sponsors who help us keep you updated on these cutting edge employee benefits topics throughout the year. Be sure to read this special section on Pages 22 and 23.

Some of the exciting employment law topics discussed in this issue include Courtney Leyes’ new year’s resolutions for HR professionals on Page 10. Kelly Campbell discusses the impact of selection procedures in her excellent article on page 24. Joe Ramsey sheds some light on the topic of misuse of performance appraisals, which you will find helpful as you are reviewing your organization’s 2015 employee evaluations. I know (L-R Dr. John Carbonell, Cynthia, and Amy West, President of WTSHRM in Jackson.) Cynthia presented “Strategic Decision Making: IQ or EQ?” at the December membership meeting at Union University on December 15.

We

are so excited about our January issue featuring Sue Meisinger on our cover! As many of you know, Sue was former

president and CEO of SHRM for 20 years, and is an author, speaker and consultant on human resource management. In addition to reading her outstanding professional profile on Page 5, you will also love her

you will find Brigette Tubbs-Jones’ article on the impact of social media in the workplace helpful as you deal with this issue daily. There is also a very interesting article discussing recent penalties McDonald’s paid for immigration-related unfair labor practices you won’t want to miss!

The spring SHRM Conferences are just around the corner. Don’t miss the early bird registration for the ARSHRM State Conference & Expo in Rogers on April 6-8. Early bird registration for the TNSHRM Strategic Leadership Conference in Nashville on April 8 ends on March 8. We are excited that The TNSHRM State Conference will be in Memphis this year. Please see Page 8 for details on early bird registration. We will be bringing you details on the MSSHRM Annual Leadership Retreat in our February issue.

Stay turned . . .

article on Page 18!

Mark your calendars to join us January 28 at 2 PM CST for our next In our first issue of 2016 we are updating you on a few

complimentary SHRM | HRCI webinar sponsored by Data Facts. We will

employee benefits hot topics. Larry Tolbert discusses

email you the topic soon. Be watching your email for your invitation.

common fiduciary errors and ways to avoid them on Page 16. Tom Hayes has provided an excellent article

Best wishes for a happy and prosperous New Year!

on employee benefits advisory services on Page 20.

Lockton contributed a very informative article on Page 14 and 15 about ACA reporting software and vendor setup questions. Jenny Kiesewetter has contributed an exciting article on a recent Supreme Court ERISA decision from the Eleventh Circuit on Page 32. We are pleased to bring you corporate profiles of some of our

Cynthia Y. Thompson | Editor Cynthia@hrprosmagazine.com www.hrprofessionalsmagazine.com

Sign up for our RSS News Feed to receive up to the minute HR Alerts on changing legislation affecting our workforce. www.HRProfessionalsMagazine.com.

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www.HRProfessionalsMagazine.com

Susan on the cover

R. MEISINGER

SUSAN R. MEISINGER, SHRM-SCP, SPHR, JD Susan R. Meisinger, SPHR, JD, is a columnist for HRExecutive Online, consultant and speaker on HR leadership issues. Meisinger is also the former President and Chief Executive Officer of the Society for Human Resource Management (SHRM), the world's largest professional association, where she led its efforts to serve the HR professional and advance the HR profession.

Under Meisinger's leadership, SHRM grew from 170,000 members to more than 245,000, revenue grew from $66 million to more than $110 million, and net assets grew from $66 million to more than $150 million. SHRM was also recognized by Washingtonian magazine as one of the top 50 "Great Places to Work" in the Washington, D.C. under her leadership.

Meisinger is a former board member for the World Federation of Personnel Management Associations, where she also served as Secretary General. She served as a member of the board of directors for SHRM and the Human Resource Certification Institute (HRCI). She is a former board member of the Ethics Resource Center, a nonprofit devoted to fostering ethical practices in individuals and organizations, and sat on the corporate board for BE&K, a billion dollar international design-build firm for five years. She also has served as the public member of the board of directors of the Certified Financial Planner Board of Standards, Inc.

Acting on behalf of SHRM, Meisinger took an active role to help shape public policy. She was one of thirteen members appointed by the U.S. Secretary of Labor to serve on the Secretary's Committee on the Future of the Workplace under the President's Council on the 21st Century Workforce. She has provided testimony and commentary to public policy makers, and is a respected advocate on behalf of the HR profession.

Prior to joining the Society, Meisinger served as Deputy Under Secretary for the Employment Standards Administration (ESA) in the U.S. Department of Labor, which included the Wage and Hour Division, the Office of Federal Contract Compliance Programs (OFCCP) and the Office of Workers Compensation Programs. As head of the largest agency within the Department, she was responsible for more than 4,000 employees, a budget of more than $3 billion, and the administration of more than 90 Federal laws and regulations. Meisinger also served as special legal counsel for the Associated Builders and Contractors in Washington, D.C. Meisinger is on the board of directors and a Fellow of the National Academy of Human Resources, an organization that recognizes individuals and institutions in HR for outstanding professional achievement and contributions to their field. She also is a Fellow of the Human Resources Policy Institute of Boston University and serves on the board of the Orleans Conservation Trust. She sits on advisory boards for the University of Mary Washington College of Business and the Workforce Institute of Kronos.

Meisinger frequently serves as an expert on workplace and business issues and has appeared on CNN, CNNfn and NBC Nightly News as well as other well known broadcast news programs. She has appeared in stories in the New York Times, Washington Post and the Wall Street Journal, among other leading national publications.

In addition, Meisinger-with former SHRM President and CEO Mike Losey and University of Michigan business school professor David Ulrich-co-authored and edited "The Future of Human Resource Management," which was published in 2005 by John Wiley & Sons. In the book, 64 thought leaders explore the critical HR issues of today and tomorrow. Meisinger received a bachelor's degree from Mary Washington College and a law degree from the National Law Center of George Washington University. She is a member of the District of Columbia Bar Association and has earned certification as a Senior Professional in Human Resources from HRCI. ď Ž www.HRProfessionalsMagazine.com

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9

attacking provisions that could be perceived as preventing an employee’s right to engage in “protected concerted activity.”

My colleagues, Jay Kiesewetter and Jeff Weintraub, addressed this subject in their article, “Handbook Apocalypse!” in a prior issue of HR Professionals magazine. For example, provisions subjecting employees to progressive discipline for insubordinate behavior have been stricken by the Board under the idea that employees have the Section 7 right to join together to protect workplace conditions. Just because their supervisors are in the line of fire and/or if these protests get rowdy and disrespectful does not mean that the employees have lost their Section 7 protections. Other policies that you might consider updating are your: leave policies to include the definition of spouse as a same-sex spouse; any policies pertaining to pregnant employees to be consistent with the Young v. UPS decision; harassment policies to cover any “textual” harassment or harassment that occurs via social media such as Facebook or Snapchat; and Bring Your Own Device policies. Also, as discussed more in detail below, consider revising your EEO policies to include gender preference and identity as protected classifications in light of the recent Supreme Court decision.

2. “Learn Something New.”

New Year’s Resolutions to Prevent an Employer’s “Auld Lan-xiety” in 2016

By COURTNEY LEYES

2016 is quickly approaching. If you are like 45 percent of the rest of Americans, you will most likely be making a New Year’s resolution or two. And, if you are like the majority of those who make these resolutions and start the year with nothing but good intentions, you will break your resolutions just 24 days into the New Year. However, unlike the idyllic resolutions you may make in your personal life (I know my yearly “Eat Healthier” resolution falls to the wayside as soon as I am confronted with a Gibson’s Red Velvet Donut . . . I am weak!), below are some good resolutions for you to make and keep as an HR Professional for the upcoming year:

1. “Tame the Bulge.” If you have not already done so, in 2016, you

should take a look at revising and updating your Employee Handbook, and losing unnecessary verbiage that will most likely offend the National Labor Relations Board (“NLRB” or “the Board”). By way of background, employee handbooks have been under fire by the NLRB the past few years. Particularly, the NLRB has been

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Employers have been reacting to the Obergefell Supreme Court decision by adding sexual preference/orientation and gender identity to the list of protected classifications in their respective EEO policies. Nonetheless, despite having these revised policies, a re-occurring issue that is increasingly on the minds of most HR Professionals is how to treat employees who may be transitioning to another gender. The infamous bathroom question is almost always asked in all of my seminars during which I discuss LGBT employees’ rights in the workplace. The re-occurrence of these issues raises the question – it is one thing to have a policy in place and it is a whole other issue when an employer has implemented that policy. Certainly, employers should learn best practices when handling these newer issues associated with a diverse workforce. For example, having a game plan in place when faced with a transitioning employee – from both a benefits standpoint (employee leave for surgeries, changing personnel file documents to reflect new legal names, etc.) and a practical standpoint would be beneficial. Make sure your workforce is trained on any of these newer policies so that supervisors will be sensitive to any transitioning employees and will be vigilant in spotting any insensitive behavior from your workforce.

3. “Fit in Fitness.”

Once you have revised your handbook, it would be a good idea to present your revisions and conduct training on any updated policies. As mentioned above, an employee handbook is only as good as your implementation of the policies and training your employees on those same policies. In fact, your training (and any investigation) is your best defense when confronted with harassment claims. As a refresher, when faced with a hostile work environment harassment claim, an employer can rely on what is called the Faragher-Ellerth affirmative defense (named after two companion Supreme Court cases) if: 1) no tangible employment action was taken against the complaining employee (e.g. discharge or a demotion); 2) the employer exercised reasonable care to prevent and promptly

correct the harassing behavior such as having harassment policies and training on such policies; and 3) the complaining employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer, such as utilizing a complaint mechanism contained in an anti-harassment policy. Training your employees on your policies and procedures will ensure that your employees understand these policies and how they are implemented and interpreted.

4. “Get Organized.” Big changes are on the horizon in wage

and hour law next year. The U.S. Department of Labor’s Wage and Hour Division (“WHD”) intends to roll out its new regulations pertaining to the white collar exemptions sometime in the summer. Particularly, the WHD has proposed to raise the salary basis threshold to meet the white collar exemptions from $23,660 annually to $50,440. The WHD’s proposed rules also contain changes to the duties required to meet the various exemptions.

Additionally, the WHD has made clear that its investigators will be targeting industries who are staffed with independent contractors. In this 15-page “Administrator’s Interpretation” guidance issued this summer clearly aimed at curbing the misclassification of employees as independent contractors, WHD head David Weil stated that most workers are employees under the Fair Labor Standards Act. Based on the Agency’s interpretation, employers should rely upon six “economic realities factors” to determine whether a worker is an employee or an independent contractor. Essentially, these factors bear on the nature and degree of the employer’s control and whether the work performed by the worker is integral to the business.

Based on these changes, employers should examine how their employees are compensated. You should consider how you want to handle those employees who may be affected by the salary basis changes. In doing so, you can look at how many hours they are working on average per week and determining an hourly rate that works for you. You can also consult with your employment attorney to explore any other potential exemptions that could apply to these employees. Additionally, you should examine any independent contractor relationships you may have. Do you have agreements in place with these individuals? While having an agreement is not a slam-dunk determinative factor as to whether a worker is an independent contractor, having an agreement in place certainly helps. Additionally, how much control do you have over these workers?

Essentially, are they free to perform the same work for other businesses?

If the answer is yes, and the less control you have over them, then the more likely this individual is an independent contractor. If you determine that an individual has perhaps been misclassified, then you may want to discuss this revelation with your employment attorney to decide how to covert this individual’s employment status.

5. “Be Less Stressed.” I promise this is not a joke, as I know you are laughing at me when I list this as a resolution. However, if you try your best to both implement and stick to the above resolutions (and contact your employment attorney when necessary), then you should be less stressed in your job. And we all could use a little less stress.

Courtney Leyes, Attorney Fisher & Phillips, LLP cleyes@laborlawyers.com www.laborlawyers.com www.HRProfessionalsMagazine.com

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HR Solutions | Payroll | Good Job

Sabotaged Success: The Number One HR Problem You’re Not Thinking About

By CLIFFORD STEPHAN

From the outside, it can look like a lot is going right for a company: they have growth, great brand recognition, and profits. Everything seems to indicate that all the right moves are happening at the right time. But no matter what’s going right, a lot of companies are getting a critical component wrong: job levels and titles.

While auditing job levels may not seem important when there are exciting things happening, not having a good handle on job levels and pay can sabotage a company’s success. Incorrect job levels undermine a company’s ability to keep talent, manage their budget, and maintain competitive edge.

While it’s an un-sexy topic, the consequences are too big to ignore. In my experience as a principal consultant with OneCompensation, helping companies to figure out job levels is what I do every day, and so I want to share how skewed job levels can hurt a company, why it happens, and why companies put off such a critical component of success.

Brace for Impact: How Skewed Jobs Levels Hurt Companies From the Inside Out Since it’s not usually on the checklist of things to do, job leveling only comes into play when a company is forced to do something about it, either because there is a lawsuit, difficulty getting the right talent, or low employee engagement.

Having the wrong job levels can mean big risks to a company’s legal liability. I saw this happen with a high-flying tech company. Everything looked great, but they had no global leveling system in place. When an employee was laid off and didn’t find work for a year, he contacted an employment attorney, who determined that he had probably been misclassified in his previous role. When the attorney contacted the company for his client’s job description, the company had to go through a painful global leveling process while in panic mode.

More commonly, I’ve seen that companies struggle to get the right talent. When job titles and levels are incorrect, that means that salary structures aren’t calibrated to the market.

Wondering why premium positions are hard to fill? Usually, it’s because a company is out of step with the competition.

More importantly, incorrect job levels can do serious damage to a company’s work force. Transparency is really important to employees today. When a company doesn’t have their story straight on job levels, employees know it. Ultimately, this can mean higher turnover, which can cost a company big time on hiring and onboarding. However, the damage it can do to employee morale is even more serious. Low engagement and motivation is often a sign that job levels are off, because misalignment makes it difficult to target the key behaviors that make a company successful.

So What Causes Job Levels to Misalign?

2. Inconsistent recruiting strategies. This is a common problem for many companies looking to attract hot talent. An aggressive manager may want to bring on a ‘superstar employee’ and pay top dollar to secure the talent. Another manager in the same department may take a more conservative approach to setting pay levels for this same employee. Without a global leveling system in place, HR’s ability to lead and guide management on these critical decisions can become ineffective, choppy, and subjective. Hiring decisions that are made without reference to market data puts a major strain on company’s job levels, and can also be a major source of inequity issues between employees.

3. Employee data is a moving target. The labor market can change fast, so regularly checking the competition is critical to having a leveling system with integrity. Knowing what the competition pays for equivalent positions can help a company prevent turnover, keep the right talent, and stay competitive.

Why Job Leveling Gets Put Off Without a clear understanding of job levels and position to market, a company may be operating in the dark.

Usually, job leveling gets put off for a few key reasons.

For one, it’s a chore. I like to compare an audit of job levels to eating your vegetables—it’s good for you, but not the most thrilling thing in the world. It’s more fun to focus on those programs that get everyone motivated. Job leveling audits are not exciting. But while no one wants to do this, sooner or later, they’re sorry when they don’t.

Second, companies usually don’t have those processes and systems in place that are set to identify triggering events. Companies are busy places, with a lot of stuff happening at once. Job level erosion usually happens over time. Without something to regularly indicate that an audit needs to happen, most companies just ignore it until they are forced to pay attention to it.

Finally, doing a job level audit can come down to a matter of bandwidth. Especially for larger companies, HR is busy with special projects and programs along with the usual business of managing the day-to-day of keeping a business moving. When HR departments just don’t have the time or expertise to do a job level audit justice, that’s usually when I get a call to help out.

When something is as critical to long-term success as a sound job leveling system, it just doesn’t pay to put it off. If you’re not sure how your job titles match up, are wondering why you can’t shore up problems with employee engagement, or don’t know how you stack up to your competition, it may be time to get some help.

After all, knowing you’ve got a problem is the first step, but making it right is what counts.

Incorrect job levels usually happen in one of three ways: 1. Reorganization. When a company changes in a big way, job levels usually do, too.

Employees who take on new roles while keeping their old titles can degrade a company’s job leveling system. It’s important to make these new job leveling determinations part of the change. Otherwise, these level changes erode data integrity, salary structures, and position to market assumptions.

Clifford Stephan | Principal Clifford@onecompensation.com OneCompensation.com www.HRProfessionalsMagazine.com

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ACA Reporting Software/Vendor Setup: What’s With These Questions About Qualifying Offers, the 98% Offer Method, and Other Stuff?

By ED FENSHOLT, J.D.and BRAD MANDACINA, CEBS

Many employers working with vendors to accomplish Affordable Care Act (ACA) reporting have received questionnaires from their vendors, making inquiries related to how the employer is complying with the employer mandate. Some of these questions include who the employer treats as eligible, how the employer determines full-time employees, what periods of time the employer is using for measurement, administrative and stability periods (where the employer is using the look-back measurement method), and more.

Some of these questions are bewildering to the employer and often are not well explained in the vendor’s questionnaire. The ambiguous questions we see most often are those for which the vendor needs answers to complete Line 22 on the employer’s Form 1094-C (although the questionnaire typically doesn’t refer to Line 22). These questions ask the employer about the following: ❖ Qualifying Offers ❖ Qualifying Offer Transition Relief ❖ Section 4980H Transition Relief ❖ The 98% Offer Method

Lockton comment: The four bullets mentioned above offer merely optional safe harbor shortcuts to ACA reporting. There are no negative implications for failing to use or satisfy any of these safe harbors, and the shortcuts are sometimes not worth the effort.

Other ambiguous questions we see on implementation questionnaires pertain to: ❖ Non-Calendar-Year Transition Relief. ❖ Non-Calendar-Year Start Date. ❖ First-Year Relief. ❖ No Dependent Coverage Transition Relief.

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HERE’S WHAT THESE REFERENCES MEAN: Qualifying Offers Typically, there is at least one question on setup questionnaires concerning whether the employer is “using the qualifying offer method” or has made a “qualifying offer” to one or more full-time employees as reflected on the Forms 1095-C prepared for the employees. Most employers are not using the qualifying offer method.

A “qualifying offer” is an offer by the employer that meets specific criteria. The qualifying offer concept was invented by the IRS as a sort of reward to the employer for offering decent coverage to one or more full-time employees at a generously subsidized rate, but the reward is complicated and sometimes not particularly meaningful.

For an offer of coverage to a full-time employee to be a qualifying offer—that is, for the employer to answer “yes” to the vendor’s question about whether the employer made a qualifying offer—employee-only coverage must provide minimum value (at least 60 percent actuarial value) and must be offered to the employee at no more than 9.5 percent of the federal mainland poverty level (roughly $93 per month for 2015).

The offer must include the opportunity to enroll the spouse and children, through the month the child attains age 26, in at least minimum essential coverage, or MEC (i.e., employer- based coverage more robust than “excepted benefits” such as typical dental or vision coverage).

The reward comes in two parts, only one of which might be available.

If the employer made a qualifying offer to a full-time employee for some or all months in 2015 for which the employer had an employer mandate obligation regarding the employee, the employer may choose to report that fact (it is not required to report it) by using Code 1A on line 14 of the employee’s Form 1095-C. If the employer chooses to use Code 1A for one or more months, it is allowed to skip line 15 (employee premium cost for the least expensive minimum value option offered to him or her) for those months; in fact, the employer must skip line 15 for those months.

The second part of the reward is more contingent. If (i) the employer made a qualifying offer for all months in 2015 for which the employer had an employer mandate obligation regarding the employee and (ii) the employee was not enrolled in selfinsured coverage of the employer for even a single day, the employer is permitted to supply the employee, in lieu of the Form 1095-C, an abbreviated statement regarding the employer’s coverage offer. But the employer must still send the actual 1095-C to the IRS, and so cannot entirely dodge completing a Form 1095-C, even though it made a qualifying offer.

Lockton comment: Importantly, an employer can satisfy the employer mandate without making a qualifying offer. And as noted above, if the employer makes a qualifying offer, it is not required to report that fact. The employer might choose instead to use Code 1E (minimum value offer to the employee, and at least minimum essential coverage to spouse and children). While using Code 1E requires the employer to complete line 15 on the employee’s Form 1095-C, line 15 is an easy line to complete.

Qualifying Offer Transition Relief This is similar in several respects to the qualifying offer method: The employer isn’t required to use or report this method, it’s complicated, and it doesn’t offer much in the way of a reward. Most employers are not using the qualifying offer method transition relief.

The employer might answer “yes” to the vendor’s question about qualifying offer transition relief if, with respect to one or more full-time employees, the employer did not make a qualifying offer for all 12 months of the calendar year, but for the months with respect to which the employee did not receive a qualifying offer, the employer in fact made a qualifying offer to at least 95 percent of its full-time employees with respect to whom the employer had an employer mandate obligation.

Where this is the case, the employer may choose (it’s not required to do so) to insert Code 1I on line 14 of the employee’s Form 1095-C for the months for which the employee did not receive a qualifying offer, but for which the employer made a qualifying offer to at least the 95 percent.

Again, the reward for this complexity comes in two parts. If the employer chooses to use Code 1I for one or more months, it is allowed to skip line 15 for those months; in fact, it must skip line 15 for those months.

Second, if the employee was not enrolled in self-insured coverage of the employer for even a single day, the employer is permitted to supply the employee, in lieu of the Form 1095-C, an abbreviated statement regarding the employer’s coverage offer. But the employer must still send the 1095-C to the IRS.

4980H Transition Relief (and/or “4980H Transition Relief Controlled Group Size”) There are two situations where the employer would say “yes” to the vendor’s question about tax code section 4980H transition relief. Most Lockton clients do not qualify for 4980H transition relief. The two situations are:

Some Lockton clients qualify for the 98% offer method.

However, it buys relief from only one requirement: the obligation to report the number of full-time employees, by month, in column (b) of Form 1094-C.

Other questions often posed by vendors refer to the following: Non-Calendar-Year Transition Relief This relief allows some employers with non-calendar-year healthcare plans to avoid the employer mandate’s coverage offer obligation prior to the beginning of the plan year that commences in 2015, provided the employer satisfies the mandate on the first day of that plan year.

See discussion on page 13, Compliance News, Spring 2014. The employees must still meet the ACA’s employer mandate reporting obligation for all of 2015, however. Many Lockton clients qualify for this relief.

Non-Calendar-Year Start Date This question simply asks for the start date of the employer’s non-calendar-year plan(s). This information is optional for 2015 on the employer’s Form 1094-C. It may serve more than one purpose, but we presume the IRS is primarily interested in this information to help it make sense of the way an employer claiming non-calendaryear transition relief reports coverage offers for 2015.

For example, if an employer indicates its plan runs on a July 1–June 30 plan year basis, that information helps explain why the employer might have used Code 1H (no coverage offer) for some full-time employees from January through June 2015, and then indicated a coverage offer for the months of July through December.

First-Year Relief

1. The employer’s controlled or affiliated service group (what we refer to as the “corporate family tree”) had between 50-99 full-time employees/full-time equivalent employees on the average business days in 2014. The relief the employer claims is relief from the employer mandate’s obligation to offer coverage to its full-time employees or risk penalties. The employer is not relieved of its ACA reporting obligation. Some vendors refer to this as “50-99 Transition Relief.”

A reference to “first-year relief ” refers to a free pass under the employer mandate for the months of January through March for the first year an employer is big enough to be considered subject to that mandate based on the number of its full-time and full-time equivalent employees in the prior year. Most Lockton clients don’t qualify for this relief.

2. The employer’s corporate family tree had at least 100 full-time employees/ full-time equivalent employees on the average business days in 2014, and the employer is “paying” rather than “playing” under the employer mandate. In this latter case, the relief the employer receives is avoiding the $2,080 per year “nuclear” penalty with respect to its first 80 full-time employees. Some vendors refer to this as “100 or More Transition Relief.”

No Dependent Coverage Transition Relief

Some Lockton clients are in corporate family trees small enough to qualify for the relief in (1) above, but most Lockton clients are too large to qualify. With regard to the relief in (2) above, very few employers are “paying” rather than “playing” under the employer mandate, and thus won’t qualify for or need the relief.

If the employer qualifies for one of the relief options described above, the ACA reporting vendor will want to know the size of the employer’s corporate family tree.

That information will, of course, tell the vendor whether the employer is claiming the relief in (1) above or (2) above.

98% Offer Method An employer may say “yes” to the vendor’s question about meeting the 98% offer method if, for all months, it offered minimum value coverage to at least 98 percent of its full-time employees with respect to whom it had an obligation to supply a Form 1095-C, and it offered at least minimum essential coverage to the employees’ children through the month they attain age 26. The employer may disregard employees in a “limited non-assessment period,” such as an initial measurement or administrative period or the first three full calendar months of a new full-time employee’s employment, as long as the new full-time employee receives a coverage offer by the first day of the fourth full calendar month.

Recall that the first obligation under the employer mandate is to offer at least minimum essential coverage to full- time employees and their children through the month the child attains age 26. This “no dependent offer relief ” refers to relief (for 2015) for employers that don’t offer coverage to full-time employees’ children in 2015, or offer them something short of MEC, but are working to install compliant coverage for 2016.

Most Lockton clients have long offered coverage to employees’ children. Often, however, that coverage (particularly self-insured coverage) terminates on the children’s 26th birthday rather than at the end of the month. It’s not clear whether employers who offer at least MEC to children but terminate it on the 26th birthday, rather than at month’s end, can qualify for this relief. In any event, employers whose plans terminate child coverage on the 26th birthday will likely want to modify those plans to provide for coverage through the end of that month, and do so as quickly as possible in order to satisfy that first obligation under the employer mandate.

Brad Owens

Lockton’s Memphis Office 901 757 6901 bowens@lockton.com

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Common Fiduciary Errors and Ways to Avoid Them

By LARRY J. TOLBERT

“To err is human, to forgive, divine.”

English poet Alexander Pope’s observation about human frailty and heavenly grace is often quoted because it is so on-target.

For a retirement or benefit plan fiduciary, however, mistakes can be costly for both the organization and the individual fiduciary.

Earlier this year, Marlene Y. Satter at benefitspro.com offered a take on a list of common fiduciary errors and shared ideas about the best ways to avoid them.

Here’s a look at some of the issues the piece raised.

Failure to identify all fiduciaries As stunning as it sounds, some plan fiduciaries in an organization can be overlooked. The oversight can be costly if they are not aware of their responsibilities, had not considered their actions in light of their responsibilities and are hauled into court to testify about their fiduciary conduct.

It is wise to remember, all these individuals are fiduciaries: • Retirement plan trustees • Investment advisors • All individuals who exercise discretion in plan administration • All administrative committee members • Anyone, such as board members, who selects committee officials

Failure to provide all fiduciaries with proper liability insurance Fiduciaries are personally liable for any mistakes they might make as fiduciaries.

In my October 2015 column for HR Professionals, I discussed those fiduciary responsibilities. These include the duties of loyalty and of care. They also include compliance with diversification and consistency rules in plans operating under the Employee Retirement Income Security Act of 1974 (ERISA).

Failure to understand the differing roles of third-party fiduciaries ERISA recognizes three types of fiduciary: • A 3(21) fiduciary who provides advice but has no discretion over plan assets • A 3(38) investment manager who decides what to do with plan assets and who is overseen by the plan sponsor • A 3(16) administrator who has responsibility for all plan administrative functions, including choosing service providers and managing investments The devil is in the details, and understanding the nuances is important, since otherwise, you might be held liable for aspects of the plan you thought were the responsibilities of others.

Failure to train fiduciaries appropriately U.S. Department of Labor auditors have identified inadequate fiduciary training as an issue.

New fiduciaries should be trained and all fiduciaries should have refresher courses.

It is important that the training be documented in meeting minutes and that materials are accessible.

Failure to take and document appropriate actions Fiduciary committees may from time to time procrastinate in making decisions or in taking actions. In other cases, committees may take action but drop the ball and not make a record of the decision or action. Either can cause problems.

Fiduciaries should take action when necessary and keep records of what they did and when and, most importantly, why they did it.

Failure to communicate and coordinate

Directors’ and officers’ coverage or employment practice liability policies might be in effect, yet they do not generally cover liability in the case of an ERISA retirement plan.

Fiduciary committees may also get distracted from time to time and members may take their eyes off their responsibilities to follow plan documents consistently, to make sure plan contributions are made in a timely manner and to monitor plan expenses to make sure they are appropriate and in line with comparable plans.

An ERISA fidelity bond, which provides a safeguard in cases of employee fraud or dishonesty, does not provide liability protection for fiduciaries.

Investment and administrative committees need to communicate and coordinate to ensure all their responsibilities to the participants and beneficiaries are met.

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Failure to follow the plan’s investment policy statement The plan’s investment policy statement guides the plan’s investments. It should be referenced in the discussion of every meeting and should be followed as a matter of due diligence.

If your plan’s investment policy statement is too complicated or too rigid, perhaps it is time to reevaluate it.

Failure to properly benchmark plan expenses Fiduciaries should know how much everything within a plan costs. They should know what the expenses are and whether those expenses to service providers are consistent with expenses of comparable plans.

U.S. Labor Department auditors are paying attention to plan expenses. Fiduciaries need to ensure that they have transparent data on monies paid to service providers.

Failure to spend enough time on participant outcomes Fiduciaries may focus more on the mechanics of caring for retirement plans than on how well they are working. Fiduciaries need to keep a close watch on how well plans are providing employees with the means for a successful retirement.

Participants make their own errors in investing, saving and even withdrawing funds. Yet, if fiduciaries pay attention to how well participants are doing within the plan, they can see how well the plan is doing at providing employees with the retirement and other benefits they are looking for.

Section 404(c) of the Employee Retirement Income Security Act of 1974 is designed to provide a safe harbor as plan sponsors transfer the legal responsibility to the participant for losses resulting from the participant’s exercise of control over his or her account.

There are limits on those protections, however.

Collaborating with a knowledgeable and experienced retirement plan advisor or consultant, someone who can help protect the best interests of plan participants and fiduciaries, is an effective first step.

Larry J. Tolbert, MBA, CEP Founder, Radian Partners LLC Larry.Tolbert@radianpartners.net www.radianpartners.net Securities, insurance, and advisory services offered through FSC Securities Corporation, member FINRA/SIPC. Radian Partners is not affiliated with FSC or registered as a broker-dealer or investment advisor. The offices of Radian Partners are located in Suite 150, 6060 Poplar Ave. Memphis, TN 38119, and may be reached by phone at (901) 202-3909.

The GIG Economy

employment models in the coming decade. While 86% of the HR professionals surveyed said that their organization used a traditional employment model, fewer (60%) anticipated that this would be the model they would use in the next 10 years. Although 19% of survey respondents said their companies currently used a non-traditional employment model (or project-based employment), 40% anticipated that this would be the employment model used in the next decade. [http:// www.shrm.org/publications/hrmagazine/editorialcontent/2015/1015/pages/1015-hr-challenges.aspx] And recently John Boudreau, Ravin Jesuthasan and David Creelman published a book entitled Lead the Work which explores some of the implications of a world where “non-employment work arrangements” are the norm, and companies leverage partnerships to complete projects, crowd source to solve difficult business challenges, or depend primarily on independent contract workers to get work done.

By SUSAN R. MEISINGER

I

was at a meeting recently where everyone was asked to introduce themselves, and explain what they did for a living. It was a mix of HR executives, consultants, vendors and association executives, and when it was my turn to explain what I did, I responded the way I always do since retiring as President and CEO of the Society for Human Resource Management (SHRM): “I do whatever I damned well please.”

You see, I’m a participant in the “Gig Economy.” I do some consulting, some writing, some board work, and some speaking. I move from gig to gig to gig. I’m part of the workforce, but not attached to any employer. I determine when and if I’ll take on a new project, and determine who I will or won’t work for.

Admittedly, moving into the gig economy wasn’t like moving to a foreign land. I knew lots of people who had been consultants, working for multiple companies, or partnering with other consultants when the work volume required an assist. And honestly, I’d been hearing about the pros and cons and use of independent contractors and contingent workers for decades. Lots of companies have temp agencies on speed dial to help with seasonal or unanticipated vacancies or workloads.

How big is the gig economy? And is there anything new? Government statistics on the prevalence of non-traditional work arrangements aren’t very helpful. The Bureau of Labor Statistics' last try to measure the use of freelance workers was in 2005, when it reported that roughly 31 percent of the U.S. population worked as freelancers. [http://www.bls.gov/news.release/conemp.nr0.htm] More recent research done in 2015 for the Freelancers Union by Edelman Berman found that thirty four percent of the U.S. workforce were freelancers and that 60% started freelancing by choice rather than necessity, an increase of 7% from 2014. Sixty percent of freelancers who left traditional employment said they made more money as freelancers, and 50% said they wouldn’t quit freelancing to take a traditional job. [http://www.slideshare.net/upwork/2015-us-freelancer-survey-53166722] Looking around, I don’t think you can ignore the fact that just as organizational structures, technologies and businesses are changing, how work gets done is changing too. There is, indeed, a growing trend for companies to place even greater reliance on the use of freelancers, independent contractors, free agents and adopt new models for how to get work done, including crowd sourcing. While some have already done it, I predict that in the future most employers and companies will describe their workforce strategies only using the term “worker”; “employee” won’t be inclusive enough to describe how things will get done.

Consider a recently issued report from the Institute for Corporate Productivity (i4cp). In Beyond Uber: Driving the Evolution of Work, i4cp reported that 95% of the executives interviewed were using or anticipated using more non-traditional (non-employee) skilled workers than ever before. Further, executives reported that their organizations were in various stages of planning or already moving toward a model in which 30 to 50% of their workforces will be non-traditional (i.e., not employees).

A Society for Human Resource Management (SHRM) research report issued about the same time came to a similar conclusion. Surveys of HR and non-HR C-suite executives found that both groups believed that many organizations will attempt to shift to the use of different, less traditional 18

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There’s another change. Where the use of contingent, contract, or other nontraditional workers was largely reserved for tactical purposes, to reduce costs, new business models are emerging and the use of non-traditional workers is increasingly a strategic decision, rather than tactical. The focus isn’t just on cost reduction; it’s also on increasing organizational capability, capacity, and agility.

But this trend toward a gig economy is not without problems. While many freelancers embrace and relish their ability to control their work destiny, many are freelancers or contingent workers out of necessity or desperation. Some workers take on jobs and projects in addition to their full-time position because they are unable to earn enough from their full-time job.

Some workers take on projects and assignments while job hunting because they need to generate some income. They may be able to string together enough assignments to earn a living, but would prefer regular employment so they have access to benefits. If the Edelman Berman research I mentioned earlier found that 60% of freelancers started freelancing by choice rather than necessity, that means 40% had no choice.

Recently, the Pew Research Center issued a report that will heighten the focus on this issue. According to Pew, the American middle class is shrinking; for the first time, the middle class is not the largest segment of the population. According to this research, in 2014, the median income of middle class households was 4% less than in 2000, and because of the housing market crisis and recession of 2007-09, their median wealth (assets minus debts) fell significantly as well. More people are at the lowest and highest ends of the income distribution, which means that the distance between the “haves” and “have nots” is growing. [http://www.pewsocialtrends. org/2015/12/09/the-american-middle-class-is-losingground/] Real wage growth has been anemic for years.

And all of these issues will continue to be front and center in the political arena leading up to the Presidential elections.

What does this mean for HR executives? Well, as you explore and expand on creative ways to get work done in a cost effective manner that meets the strategic needs

of your organizations, you’d be wise to keep an eye on the public policy developments around the broader issue of how workers are treated in general, and how contingent labor is treated in particular. In a future where businesses place greater reliance on non-traditional workers, HR executives will have to be mindful of how public policy makers and the courts are reacting to the new models.

The recent challenge to Uber, and how it classifies its drivers, is a good example. The Uber business model allows drivers to control when they’ll work and provide their own equipment; Uber treats its drivers as independent contractors. This year the drivers sued Uber in California, claiming that they are really employees of Uber, and that they have been misclassified as independent contractors. The drivers are seeking reimbursement for expenses such as gas and vehicle maintenance and payment of tips that they claim were not passed on to them.

The California court has ruled that the lawsuit could be brought as a class action, significantly raising the stakes for Uber. If the court’s final decision holds that Uber drivers are employees, not independent contractors, Uber will be liable for the costs of Social Security, workers' compensation, and unemployment insurance. The Uber business model, and Uber, may not survive. Lyft, a competitor to Uber, has also been sued, and may also not survive.

And Uber and Lyft will soon be battling on another front: The Seattle City Council recently voted to allow drivers for both companies to unionize.

Companies such as Uber and Lyft would be required to bargain with drivers if the majority of the drivers voted for representation, and bargaining would be handled by a nonprofit organizations certified by the city.

Litigation has been brought in other jurisdictions against other businesses with a similar business model. Handy, a company that allows customers to book a maid or handyman services through its website or a smartphone app, has been sued in both California and Massachusetts by workers who

claim they were employees, that they were paid less than minimum wage and illegally forced to cover basic costs of the job.

CrowdFlower, a crowdsourcing business, settled a class action lawsuit brought by crowdsource workers who claimed they were not independent contractors but employees, and were paid less than the legal minimum wage. And last fall, class-action lawsuits were filed against on-demand food delivery companies DoorDash and GrubHub in California, alleging that the drivers should not be considered independent contractors, as their companies have classified them, but employees.

While litigation is making news, the U.S. Department of Labor is increasing its enforcement efforts to stop employers from misclassifying people as independent contractors, if the Department believe that the individuals are really employees. In recently published guidance on determining who is an employee under the Fair Labor Standards Act (FLSA) the Department also noted that “many states have acknowledged this problematic trend and have responded with legislation and misclassification task forces.” [http://www.dol. gov/whd/workers/misclassification/AI-2015_1.htm] An on-demand, or “gig economy” is certainly creating exciting new work opportunities for some. But it’s also raising hard questions about what new worker protections might – or might not-- be necessary in the future, and the courts and public policy makers are trying to provide answers. HR executives would be wise to not only pay attention to this trend, but participate to ensure reasonable approaches are adopted.

Susan R. Meisinger, Esq., SHRM-SCP, SPHR Sue@SueMeisinger.com Twitter@suemeisinger

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A New Year and a

New Strategy?

Employers today demand more than just insurance placement and service – and rightfully so. Navigating healthcare reform continues to be extremely complicated and costly. Additionally, employers have a greater sense of urgency in controlling healthcare costs that are exacerbated by benefit mandates, a changing provider landscape, specialty pharmaceuticals and increased enrollment in group health plans.

So as an employer evaluating your benefits strategy, and potentially your strategic partners, these are some things you should take into careful consideration?

It takes a Village

By TOM HAYES

H

istorically, the act of turning the calendar to a new year symbolizes change and a fresh look toward the future. The fact is, it's a bit more complex than that. As an HR professional reeling from the health reform complexities of counting employees in 2015 – and its potential impact on your program in the year ahead –, this may be the right time to step back and reevaluate your entire employee benefits strategy.

As we enter a new year of challenges and opportunities – specifically as it relates to the world of employee benefits consulting – I’m reminded how much our business model has changed over the past five years. And by change, I don’t mean a slight remodel. We’re talking complete overhaul.

In case you didn’t get the memo, the traditional insurance brokerage model is dead. Time of death: March 23, 2010.

Complexities have always existed for employers looking to purchase health insurance, but it was certainly manageable prior to the Affordable Care Act. Does the carrier have the network physicians and hospitals our employees want to use? Is the network pricing competitive to help manage costs compared to our utilization? How can we better communicate our benefits program to our employees? What’s the best method of enrollment? What if we offered a wellness program?

These were common questions circling the executive conference table prior to 2010 – and they were easily answered by your trusty insurance broker. Ask a CFO or HR manager today to list the top 10 issues around their corporate benefits program, and it's a pretty safe bet procuring insurance and negotiating renewals wouldn’t be near the top.

The transformation in employee benefits advisory services has been swift and decisive. Mergers and acquisitions are the norm in our world, as firms consolidate and position themselves to compete in a resource-driven industry.

It’s essentially an arms race. In addition to advisors, account managers and enrollment specialists, we now have senior HR advisors, law-trained professionals, financial analysts, population health management experts and actuarial resources to support our clients’ daily needs.

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A good employee benefits consultant knows a lot.

He or she is also the quarterback of an outstanding team. It’s no longer enough to be a generalist in employee benefits. You need a team of experts in every facet of your program that understands your overall management strategy. A true benefits advisory firm will support you with HR advisory, regulatory compliance and support (ACA, ERISA, FMLA, etc.), health management and claims informatics, and actuarial and financial analytics. If you feel your benefits advisory team is a business “partner” in these areas, then you’ve made the right hire.

Compliance is King Simply put, the Affordable Care Act is complicated. It’s complicated for professionals trained to understand it and provide advice on it. It’s absolutely critical that you’re receiving competent advice regarding the law and how it could affect your organization. Missteps here can be very costly in 2016 and beyond.

Think Outside the Box I firmly believe within every challenge lies an opportunity. Health reform certainly offers many challenges, but is your organization willing to put all options on the table and consider alternatives?

Carefully review benchmark data as it relates to your industry and peers. Are there opportunities for benefit changes? Do your employee demographics support looking at alternative funding options? Have you considered best-in-class disease management or specialty pharmacy programs? How about narrow or tiered networks? Does your company culture support a successful wellness strategy? Most importantly, are you being asked these questions?

Know Your Numbers Data analytics is critical when identifying the factors that affect your employee benefits plan. From determining the impact of plan design changes to defining performance metrics, actionable data is the key to making informed decisions. You can’t change what you can’t measure.

As we head into 2016, carve out the time to step back and review your employee benefits strategy. There’s never been a better time than now to make sure you’re aligned with the right business partners to navigate your organization through a post ACA world.

Tom Hayes is the Employee Benefits National Practice Leader for Regions Insurance, a Top 30 insurance firm nationally and the 3rd largest bank-owned agency in the country. Regions Insurance has 28 offices in 13 states across the Southeast and Indiana.

Have questions? Letâ&#x20AC;&#x2122;s talk.

When it comes to securing the right answers to comply with the Affordable Care Act, who you ask can be every bit as important as what you ask. Let the ACA-trained professionals of the Regions Insurance Client Resource Team provide the guidance you need to steer your organization in the right direction.

Tom Hayes

Katrina McKinney

Employee Benefits Practice Leader tom.hayes@regions.com 479-684-5259

Sales & Marketing Coordinator katrina.mckinney@regions.com 205-264-7177

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The Coverage You Need.

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Find Regions Insurance offices in these states: Alabama, Arkansas, Florida, Georgia, Indiana, Louisiana, Mississippi, South Carolina, Tennessee and Texas Š2015 Regions. Regions Insurance is an affiliate of Regions Bank. Products and services are offered by Regions Insurance, Inc., and underwritten by unaffiliated insurance companies.

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Employee Benefits Companies Regions Insurance is national leader in employee benefits and property & casualty consulting with a focus on client-centric delivery of solutions, expertise and resources designed to positively impact all areas of risk management, compensation and human capital. We view ourselves as a strategic partner to our clients and continuously measure our effectiveness in delivering outstanding results.

Positioned to win in a rapidly changing industry, Regions Insurance supports its customers with more than 700 professionals in 28 offices in 12 states. Regions Insurance Group is a wholly owned subsidiary of Regions Financial Corp (NYSE, RF) and is a Top 30 brokerage nationally and 3rd largest bank-affiliated agency by Business Insurance.

Lockton Companies Lockton Memphis marries global benefits and risk management expertise with the personal touch of local service from the 19 associates in our Memphis office. While Lockton is the world's largest privately owned insurance brokerage firm, clients most frequently describe us as team members who partner with them to make their business better. We achieve this by improving your bottom line, managing your capital, attracting and retaining talent, as well as by protecting your people, your property and your reputation. We are passionate about serving our clients, developing our associates, and contributing to our communities.

Brad Owens Producer

Colonial Life Insurance

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Blake Rogers

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Tennessee Territory Sales Manager

Kentucky Territory Sales Manager

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Colonial Life & Accident Insurance Company is a market leader in providing financial protection benefits through the workplace, including disability, life, accident, dental, cancer, critical illness and hospital confinement indemnity insurance. Headquartered in Columbia, S.C, and founded in 1939, Colonial Lifeâ&#x20AC;&#x2122;s benefit services and education, innovative enrollment technology and personal service support more than 80,000 businesses and organizations, representing more than 3 million of Americaâ&#x20AC;&#x2122;s workers and their families.

The Sims Financial Group, Inc.

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The Sims Financial Group, Inc., founded in 1988, is an independent wealth management firm comprised of experienced Financial Services Professionals dedicated to helping clients achieve their financial goals. We have a proud history of serving our communities by assisting professionals and businesses in all areas of financial management. With offices in Memphis and Nashville, (Atlanta in 2016),The Sims Financial Group, Inc offers a full range of group health, life and disability plans. We also offer retirement products and services and work with companies of all sizes. We custom-designed programs that help our clients recruit, retain and reward key employees.

Radian Partners

Larry J. Tolbert, MBA, CEP Founder, Managing Partner Radian Partners

Radian Partners founder Larry J. Tolbert, MBA, CEP and his team of finance, insurance, investment and tax specialists work collaboratively with C-suite executives, as fiduciary, to deliver compliant, transparent and seamless benefit plans for firms of any size or complexity. Radian Partners is independent and operates from offices in Memphis and Franklin in Tennessee. Securities, insurance and advisory services offered through FSC Securities Corporation, member FINRA/ SIPC. Radian Partners is not affiliated with FSC or registered as a broker-dealer or investment advisor.

CK Harp & Associates CK Harp & Associates is an inter-disciplinary business consulting services firm doing business since 1996. The firm specializes in employee benefits, assistance with human resources issues and leadership training and development. They are a dedicated business partner committed to the success of your business by strategically designing programs to facilitate growth and achieve success.

Cammie Scott President, MSIE, ChHC, CLTC, LUTCF, REBC, RHU, SHRM-SCP, SPHR

CK Harp & Associates is owned by Cammie Scott, SHRM-SCP, SPHR, and the 2013 NOARK Human Resources Professional of the Year. They are committed to providing quality training and consulting services. For more information, email info@ckharp.com or call 479-750-4411.

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Three Strikes and You Are Out:

tionately excluding persons based on protected class status, where the test procedures are not “job related and consistent with business necessity.” An employer may be able to meet the “job related and consistent with business necessity” standard by showing that the selection procedure is necessary to the safe and efficient performance of the job. However, even if an employer meets that standard, the applicant may challenge the procedure by demonstrating that there is a less discriminatory alternative available.

Griggs v. Duke Power Company, 401 U.S. 424 (1971).

A recent decision from the Sixth Circuit Court of Appeals reminds employers of the perils of applying promotional selection procedures in a disparate manner. Howe v. City of Akron, No. 14-3352 (6th Cir. Sept. 17, 2015). In 2004, the Akron Fire Department adopted a selection procedure to assist in making promotion decisions for the positions of Lieutenant and Captain. The selection procedure included a 100-question multiplechoice exam regarding technical job requirements, a written work sample exercise and two oral assessments. The written and oral test scores were standardized by converting them to a 90-point scale, and additional points (up to 10) were added based on seniority.

Based on the overall score, a list was developed of candidates eligible for promotion (final test score of 70% or better). Candidates were ranked according to score. When a vacant Lieutenant or Captain position became available, the Personnel Director would interview the three highest scoring candidates, and make a recommendation to the Mayor. However, if a candidate was interviewed and passed over three times, then his or her name would be removed from the list, making it possible that a candidate with the top score might never receive a promotion, hence “three strikes and you are out.”

Except When the Impact of Selection Procedures is Disparate!

T

By KELLIY CAMPBELL

he use of tests can be very effective tools for selecting which applicants or employees are most qualified for a particular job. However, employers may find their selection procedures under attack when legal challenges demonstrate those procedures disparately impact employees in protected classes in violation of federal and state employment laws. Therefore, employers should ensure that selection procedures are utilized in a non-discriminatory manner to avoid having those procedures from being struck down by courts.

One federal law of particular concern is Title VII of the Civil Rights Act of 1964 ("Title VII"), which prohibits employment discrimination based on race, color, religion, sex, or national origin. With respect to pre- and post-employment selection procedures and tests, Title VII permits such tests as long as they are not “designed, intended, or used to discriminate because of race, color, religion, sex, or national origin.” 42 U.S.C. § 2000E-2(h). Title VII also imposes restrictions on the scoring of tests in that employers are not permitted to (1) adjust the scores of; (2) use different cutoff scores for; or (3) otherwise alter the results of employment-related tests on the basis of race, color, religion, sex, or national origin.

Title VII prohibits both “disparate treatment” and “disparate impact” discrimination. Under the prohibition of disparate treatment, employers are required to administer all tests and selection procedures in the same manner regardless of race, color, religion, sex, or national origin.

With respect to “disparate impact” under Title VII, employers are prohibited from using tests or selection procedures which appear to be neutral but in fact have the effect of dispropor-

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During the following two year period, 28 candidates were promoted to the rank of Lieutenant and 12 to the rank of Captain. Despite the seeming objective nature of the selection process, of the 28 candidates promoted to Lieutenant, only 3 were African American, and only 7 were over 40. Of the 12 who became Captain, only 7 were Caucasian.

The Plaintiffs, members of the Akron Fire Department who took the 2004 promotion exam, filed suit challenging the promotion selection processes and alleging age and race discrimination under federal and state law. The Plaintiffs alleged that the promotional process adversely impacted 12 Caucasian Captain candidates on the basis of race, 8 Lieutenant candidates on the basis of age, and 3 African-American Lieutenant candidates on the basis of both age and race.

At trial, the Plaintiffs and Akron presented evidence about the statistical significance of the disparities between the promotion of each protected group and argued about whether the statistical tests were appropriate tools to evaluate the disparate-impact claims. The Plaintiffs also offered expert testimony that the examinations and the promotion processes were not job related. After trial in 2008, the jury found that business necessity did not justify the promotion process. The jury awarded each candidate for the Lieutenant position $9,000 in compensatory damages and $72,000 in front pay. The jury awarded each candidate for the Captain position $10,000 of compensatory damages and $80,000 in front pay.

Multiple post-trial motions and appeals ensued between the parties in the intervening 9 years, which included among other things injunctive relief ordering promotions of the Plaintiffs. The first appeal to the Sixth Circuit Court of Appeals involved the District Court’s injunctive decision ordering the promotions. Howe v. City of Akron, 723 F.3d 651 (2013). In the first Howe decision, the Sixth Circuit held that the Plaintiffs had established a prima facie case of disparate impact, in that they had established “a particular employment practice” that “caused a significant adverse effect on a protected group.”

Once that prima facie case was established, the burden shifted to the defendant-employer to show that the practice in question is a “business necessity,” which the City of Akron failed to do. If a defendant-employer demonstrates business necessity, the burden returns to a plaintiff to show that there are alternative practices without a similarly undesirable discriminatory effect, which would also serve the employer’s legitimate interest.

In Howe I, the Court of Appeals held that the challenged promotional process was a specific employment practice. The Court held that the Plaintiffs had demonstrated adverse effect by applying the “four-fifths rule” to the promotion rates instead of exam pass rates, as the outcomes of that employment practice-promotion rates-was the proper metric for determining “adverse effect” or lack thereof. While not dispositive, the “four-fifths rule”

may be used to demonstrate the adverse effect element of a disparate impact claim, in showing that a “selection rate for any [protected class] is less than four-fifths…of the rate for the group with the highest rate.”

Ultimately, the latest decision (Howe II) from the Sixth Circuit Court of Appeals in September of 2015 affirmed the liability judgment in favor of the Plaintiffs with respect to their disparate-impact age- and race-discrimination claims, but reversed the back-pay award and remanded the case (with assignment of a new judge) for a new trial on the issue of back pay.

In affirming the liability judgment in favor of the Plaintiffs, the Sixth Circuit acknowledged that it had already decided the issues pertaining to liability in Howe I. However, the Court of Appeals determined that the District Court had erred in its calculation of back pay, holding that back pay should commence on a start date of when the employer used the discriminatory practice for the first time, i.e., when the Akron Fire Department first promoted firefighters using the discriminatory promotional process. However, back pay is limited to no “more than two years prior to the filing of a charge with the EEOC,” which had to be determined individually for each separate Plaintiff. The ending date was correctly determined as the date that the Plaintiffs were ordered to be promoted by the District Court. However, the back pay award should also include any anticipated raises and fringe benefits, or increases, which would have been implemented during the back pay period.

As demonstrated in this case, standardized testing may be helpful in determining a candidate’s eligibility for a position, as such tests provide objective assessment of the candidate’s skills and knowledge. However, to avoid having selection procedures struck down by a court, caution should be exercised to ensure that such tests do not have a disparate impact against protected classes.

To ensure compliance with Title VII, and avoid disparate impact claims in testing and selection procedures, employers should consider the following recommendations: • Ensure that tests/selection procedures are being administered without regard to protected classification; • Ensure that tests/selection procedures are job-related and that the results are appropriate for the purposes for which they are intended; • Review the impact of selection procedures to ensure that the procedures being used will not screen out a protected group and, if so, adopt an alternative procedure;

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• Ensure that selection procedures are updated to reflect current job requirements, which will assist the employer in establishing a “job related and consistent with business necessity” standard if challenged; and • Before adopting a test or selection procedure, the employer should verify that the test is appropriate for the job at issue as well as the organization, and that it is being and will continue to be appropriately administered and interpreted.

r a i n e y k i z e r . c o m

Memphis Jackson Nashville Memphis Jackson 901-333-8101 731-423-2414 901-333-8101 731-423-2414 615-651-7420

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Regional Managing Member (Morristown, TN office) Wimberly Lawson Wright Daves & Jones, PLLC www.HRProfessionalsMagazine.com

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But, the contours of performance issues are more subtle.

Evaluating E

valuations

Conveying the fact that a performance lag even exists may require thoughtful explanation. Pushback regarding the reason for substandard performance may be staunch and complex. Evaluating the employee’s reasoning might also require the manager to involve other employees.

Issuing constructive insight and formulating a plan to improve performance requires more mental energy than simply instructing an employee not to do something. Another prevalent thought, albeit misplaced, is that the next time this happens is when it will be addressed. Where most performance evaluations fall short is the unwillingness to provide unfavorable feedback directly to an employee.

It may be because of the relationship between the two parties. It may be because the manager truly thinks that a negative evaluation will not work.

It may be because, by the time the evaluation rolls around, the performance issues that plagued February no longer seem as troubling. It may be because the manager has forgotten about the problems in February. Or, it may be that it’s far easier for the manager to serve up a palatable evaluation than weather the employee’s indignation that could potentially follow a sub-par evaluation. Still, if the evaluation does not reflect the actual situation, a degree of doubt is introduced. That doubt may later cloud an assessment of the employer’s purported motivation for implementing discipline on account of poor performance.

Litigation and Employee Evaluations

By JOSEPH A. RAMSEY

The aim of employee evaluations is to provide constructive feedback, record performance and, perhaps, incentivize or increase compensation, or promote. Oftentimes, these evaluations are slated for year-end, coinciding with the holiday season. Here it is, December, time to rehash your entire year’s performance. Measuring performance in such a cyclical way may seem natural, given how the business may operate or how we begin anew our calendars and planners. But, is the “Year in Review” approach effective?

For some, assessing an employee’s performance once a year is like one day of practice or one day of clean living: it doesn’t do any good.

Potentially Detrimental Effects of Evaluations Worse than “no good,” is the annual evaluation actually detrimental? It is not a bold prediction to say that, for many reasons, no one really likes to conduct annual employee evaluations, be it the manager or the person who is evaluated. It is the end of the year and managers are trying to meet certain goals and deadlines, ensure projects are completed, or plan for the next year or next project. The task of evaluating employees seems like arbitrary box checking, driven not by utility or opportunity, but by the fact that it has to be done. How unfortunate would it be to have the dreaded annual employee evaluation process also turn out to be detrimental to the employer and even the manager? But, without question, if not done properly, employee evaluations can be ineffective and detrimental.

The ineffectiveness relates to the likelihood of meager returns in exchange for substantial efforts, and they can be potentially detrimental because of the risk associated with deficient evaluations. There is a reason the personnel file is often the first item requested in employment litigation. Opposing counsel is on a quest for documents pertaining to employee discipline and employee evaluations. More frequently, although not at the preferred rate of one-hundred percent, matters of discipline are documented.

By way of example, an employee is continually having performancerelated issues. Towards the end of the year, in November, there is a marked improvement regarding the employee’s performance and demeanor.

Year-end evaluations have occurred in December for the past ten years, and the employee appreciates what month follows November. He shapes up his act, and when the time comes for evaluations, the manager is either too blinded by the employee’s recent improvements to make a comprehensive assessment, or the manager is reluctant to risk losing these recent gains on account of the employee’s reaction to an honest evaluation. So a favorable evaluation is issued: the employee meets or exceeds expectations.

A perception that does not reflect reality is created.

Then, several months later, the employee reverts back to his old ways. He receives a verbal counseling or two, and, possibly, even a written counseling that improvement is needed. Improvement still does not follow and employment is terminated. The reason given is a “continued failure to meet expectations.” The former employee files a lawsuit, claiming he was terminated for unlawful reasons, and that the reason given for his termination is merely pretext for the unlawful reason.

As evidence that his performance issues were not the real reason for his termination, the former employee points to ten or so annual evaluations wherein he was evaluated as meeting or exceeding expectations. Of all the places where someone would expect to find out how an employee is doing, it is in an employee evaluation. If the employee’s evaluations said he was meeting or exceeding expectations, how could he be terminated for continuously failing to meet expectations?

Building an Effective System

Discipline vs. Evaluation

All of this is not to say employees should be immune from evaluation. And all of this is not to say there is an easy solution. But first and foremost, employers must appreciate the issues associated with employee evaluations.

Knowing the pitfalls will help build a solution that fits your organization and will enable management to evaluate the proficiency of that system.

Documenting disciplinary issues is simpler than measuring performance. There is often an obvious infraction, the infraction should not be committed again, and the discipline is presented. The employee likely understands the misstep, although they are often not likely to admit it.

It is best to keep the system simple; it depends on the manager to manage it, although HR should have a role in evaluating employee reviews and not just permit all reviews to be rubber stamped. The standards utilized in the review system should be clear and related to the job duties at issue.

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Effective evaluations also encourage employee input and offer constructive and specific actions for improvement A common understanding as to the evaluation and feedback system is also imperative. Problems occur, for example, when some managers regard a “6 out of 10” as “above average,” when other managers regard 6 out 10 as a “D” grade. This is another reason why companies should seriously consider foregoing appraisals dependent on a complex series of grades, numbers or formulas. This is not to say that certain metrics could not be used; but, such a system is dependent on common application of an objective standard. For instance, are some managers grading employees against each other, or grading an employee based on the level of performance required to carry out the requisite duties successfully?

Evaluation and appraisal is always important, and not just at the end of the year. Still, if year-end evaluations are a must, the opportunity for success would be increased if the final evaluation was supported by documented evaluations and feedback throughout the year. This signals to the employee that the final appraisal, at least in part, is based on information that had previously been shared with the employee, reducing the chance of an unpleasant surprise. The hope is also that with more regular feedback, performance will improve throughout the year. This may actually make the year-end evaluation more efficient and productive.

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But, just implementing a more frequent, efficient system will not be a cure-all. Regardless of the system utilized, it is crucial that managers understand not only the importance of proper evaluations and proper feedback, but also how to conduct proper evaluations and how to give proper feedback. With annual evaluations, managers are conducting evaluations once a year. That type of frequency does not afford much of an opportunity for managers to build and polish these skills.

It may be that the manager does not quite understand what a proper evaluation looks like. Examples or samples of proper evaluations should be furnished. If a manager believes an encouraging message will be more beneficial for a certain employee, the manager should keep a dated record of the fact that this approach was utilized. Managers should also understand that disciplinary actions related to poor performance must be supported with documentation. In addition to more regular evaluation and feedback, this evaluation and feedback should be part of the manager’s job duties and reviewed to assess the manager’s performance in this area. HR can help equip managers with the tools and skills necessary for an effective appraisal system.

If it is determined that the current method of evaluations is inefficient and potentially detrimental, it is time to consider a new system. It may even be a welcome change, especially in December. More frequent meetings, even if brief, between managers and employees to share information that is geared towards overall improvement, not a grade, should be a focus.

Still, form should not trump substance; regardless of the evaluation system utilized, or the frequency of evaluations, if the evaluation and feedback is not done properly, the inefficiencies and potential for bad litigation facts will still remain. In the end, managers must understand how to conduct proper evaluations and give proper feedback and appreciate their collective role in this critical employment process.

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McDonald’s to Pay

Under the settlement agreement, MDCPS will pay a $90,000 civil penalty to the United States and will establish a $125,000 back pay fund to compensate individuals who lost wages because of the MDCPS’s practices. The settlement also requires MDCPS to revise its employment practices in regards to non-discrimination within 90 days and submit them to OSC for approval, undergo compliance monitoring for three years, and have OSC train its human resources employees on the antidiscrimination provision of the INA.

in Penalties

In a very unique remedy, OSC will provide one-hour training sessions regarding workers’ rights to students at up to 10 high schools in MDCPS as well as five adult English for Speakers of Other Languages.

$355K

By BRUCE E. BUCHANAN

The Justice Department’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) has recently reached settlements with McDonald’s USA LLC and its corporate affiliates and subsidiaries (McDonald’s), Miami-Dade County Public Schools (MDCPS), and Yellow Checker Star Transportation Company (YCS) resolving allegations of discrimination against employees because of their citizenship status in violation of the Immigration and Nationality Act (INA).

In the McDonald’s case, the OSC opened its investigation based on information received on its worker hotline. The investigation found that McDonald’s had a longstanding practice of requiring lawful permanent residents (LPRs) to show a new permanent resident card when their original document expired. Those LPRs who were asked and could not provide a new permanent resident card were not allowed to work, which resulted in some employees losing their jobs. The law clearly prohibits this practice because an individual does not lose their permanent resident status when their card expires. (On the other hand, when a work authorization card expires, it must be re-verified or the company will be employing an undocumented worker.) The investigation further found that the company did not make the equivalent request to its U.S. citizen employees who showed documents that later expired, such as a U.S. passport. The anti-discrimination provision of the INA prohibits employers from placing additional documentary burdens on work-authorized employees during the employment eligibility verification process because of their citizenship or immigration status.

Under the settlement agreement, McDonald’s will pay $355,000 in civil penalties to the United States and pay back pay to all eligible employees or former employees, who were employed between September 23, 2012, and March 1, 2015, lost work or their jobs due to these unlawful documentary practices.

The settlement agreement also requires McDonald’s to undergo compliance monitoring for 20 months for all HR consultants and similarly-situated employees to review numerous government publications on immigration compliance, revise its immigration compliance practices in regards to non-discrimination, submit any proposed changes to the OSC for their OSC for approval, and have hundreds of HR consultants and General Managers attend multiple training sessions conducted by OSC through webinars on the INA’s anti-discrimination provision and the appropriate use of E-Verify.

MDCPS Settlement In the MDCPS case, the investigation found that MDCPS required non-U.S. citizens, but not similarly-situated U.S. citizens, to present specific documents to prove their employment eligibility. The INA’s anti-discrimination provision prohibits employers from making specific documentary demands based on citizenship or national origin when verifying an employee’s authorization to work.

LPRs have authorization to live and work in the United States on a permanent basis. As proof of that status, a LPR receives a permanent resident card, commonly called a “Green Card,” but LPRs are eligible to use various documents that show their eligibility to work.

LPRs do not have to show their permanent resident cards to show their eligibility to work.

Like all workers, they can choose whatever valid documentation they want to establish their employment authorization. Furthermore, LPRs who decide to show an unexpired permanent resident card are not required to present any additional documentation when their card expires, and employers cannot request additional documents from them.

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YCS Settlement In the YCS (the umbrella corporation for Nevada Yellow Cab Corporation, Nevada Checker Cab Corporation, and Nevada Star Cab Corporation, all Las Vegas taxicab companies) case, the OSC’s investigation found that YCS violated the INA’s anti-discrimination provision by requiring non-U.S. citizens, but not similarly-situated U.S. citizens, to present additional and unnecessary documentation to prove their employment eligibility. The INA’s anti-discrimination provision prohibits employers from placing additional burdens on work-authorized employees during the hiring and employment eligibility verification process because of their citizenship status or national origin.

Take Aways In YCS agreeing to pay $445,000 in civil penalties, it agreed to one of the largest amounts of civil penalties levied by OSC for citizenship status discrimination. Other terms of the settlement agreement include: YCS placing six print advertisements in the monthly trade publication, Trip Sheet, over a one-year period advising individuals of the anti-discrimination provision of the INA; undergo monitoring for 18 months, during which time YCS will provide OSC every four months a list of newly hired employees, from which OSC can choose to review the I-9 forms of 150 individuals; revise its nondiscrimination policies within 30 days; and train its employees on the INA’s anti-discrimination provision.

These settlement agreements show the growing size of civil penalties and back pay for citizenship status discrimination and the creativity that OSC is using in crafting settlements.

I strongly advise employers to get proper training from an immigration compliance attorney as too many employers are demanding specific documents from non-citizens but not from U.S. citizens, more documents than necessary from non-U.S. citizens and reverification of green cards.

Without this training, employers may be facing lots of liability in the same manner as these employers.

Bruce E. Buchanan, Attorney Siskind Susser P.C. bbuchanan@visalaw.com www.visalaw.com

Labor Talk: An Employment Law Update â&#x20AC;&#x201C; November 17

Bass Berry Sims attorneys (L-R) Stephanie Roth, Tim Garrett, Angelica Fortney, Bob Horton, and Dustin Carlton Bob Horton, Chair of the Labor and Employment Law Section at Bass Berry Sims, spoke on the new proposed FLSA regulations and other new and proposed legislation.

Angelica Fortney provided an update on ACA Reporting for 2015.

Stephanie Roth presented an update on the FMLA and ADA.

Tim Garrett, past Chair of the Labor and Employment Law Section at Bass Berry Sims, also spoke on the FMLA and ADA.

Dustin Carlton and Stephanie Roth discussed employee leaves of absence.

Your Resource for Legal Innovation and Inspiration Attendees at the Bass Berry Sims Seminar.

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SUPREME COURT WATCH:

Recovery of an Overpayment When the Funds Have Been Spent.

What’s a Plan Sponsor to Do?

By JENNIFER S. KIESEWETTER

On November 9, 2015, the United States Supreme Court heard oral arguments in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, an Eleventh Circuit case where an ERISA health plan sought to recover medical benefits paid to an injured participant after that participant’s personal injury settlement funds had already been spent. The Supreme Court will determine whether it is “appropriate equitable relief ” under ERISA to require a participant to reimburse his health plan for such medical expenses when the money is dissipated.

Background In 2008, Robert Montanile was in an automobile accident with a drunk driver. Mr. Montanile underwent surgical procedures as a result of the accident and obtained follow up medical care, all of which was covered under the National Elevator Industry Health Benefit Plan in which he was an employee-participant. Mr. Montanile subsequently sued the driver and obtained a $500,000 settlement. However, Mr. Montanile spent most of his settlement money on legal fees of $263,788.48 and on everyday living expenses for himself and his daughter. He did not reimburse his employer’s health plan for any of the medical expenses forwarded on his behalf for his medical care. After resolution negotiations between the health plan and Mr. Montanile reached an impasse, an ERISA lawsuit was filed to enforce the health plan’s reimbursement provisions, which were found in the plan’s summary plan description.

The Eleventh Circuit Holding: A Departure from Sereboff The Eleventh Circuit upheld the lower court’s opinion that Mr. Montanile must reimburse $122,044.02 to the Board of Trustees of the National Elevator Industry Health Benefit Plan, despite the dissipation of settlement funds. In so ruling, the Eleventh Circuit held that the equitable lien rights found in the health plan’s summary plan description were enforceable under ERISA and the plan could enforce its lien against the settlement proceeds even though Mr. Montanile had already spent the proceeds on other expenses.

The Eleventh Circuit’s holding is a departure from a previous Supreme Court case on reimbursement claims (also referred to as subrogation claims). In 2006, the Supreme Court previously addressed the subrogation issue in an unanimous decision in Sereboff v. Mid Atlantic Services, Inc., where the Court held a plan must comply with strict tracing rules that require that such settlement funds be within the possession and control of the participant at the time that the plan imposes an equitable lien on such funds. Sereboff did not address what would happen to the plan’s equitable lien claim if the participant spent, or otherwise dissipated, those settlement funds.

Since Sereboff, lower courts have issued conflicting rulings as to whether actual or constructive possession and control of such settlement funds is required for such an equitable lien to attach.

To date, the First, Second, Third, Sixth, Seventh and Eleventh Circuits have issued opinions allowing ERISA plans to enforce equitable liens against settlement proceeds that have been dissipated by the participant. The Eighth and Ninth Circuits 32

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have issued opinions holding that ERISA plans are not entitled to such equitable lien remedies when dissipation has occurred. The Fifth Circuit, standing alone, specifically looks to plan language. The Supreme Court will use Montanile to resolve this split among the lower courts.

The Summary Plan Description: A Governing Plan Document in Light of Amara?

As stated above, the Eleventh Circuit held that the health plan’s summary plan description was a governing plan document and its equitable lien rights were enforceable under ERISA. Such a holding is contrary to the Supreme Court’s 2011 case, Cigna v. Amara, where the Court held that a summary plan description was not a plan document and its terms were not enforceable under law. The Eleventh Circuit distinguished Amara in its holding by stating that in Montanile the summary plan description was the only written document which laid out the terms of the plan, and thus it should be treated as the plan.

It is not known if the Supreme Court will resolve this issue in its holding. However, even in light of Amara, issues revolving around summary plan descriptions are still convoluted, especially in the health plan world. Since one of the basic tenets of ERISA is that the plan document governs, a further clarification from the Court of which documents constitute the “plan document” would be helpful.

Impact of the Supreme Court’s Decision Although not indicative of a final decision, during oral arguments, the Justices debated the practical impacts of possible rulings. Who should bear the risk? Should it be the participants? Or the plans?

Some additional implications that could arise are as follows: • Is it unfair for participants to reimburse the health plan when they may need to money for much-needed living expenses?

• By requiring such reimbursement, is this putting participants in a tough financial position?

• Or is this what participants signed up for when they signed up for health coverage?

• Is this a bargained-for benefit?

• By not reimbursing this expense, who bears the cost?

• Does the cost get extended to other participants and beneficiaries in the health plan, thus increasing the cost of coverage?

Attorneys for both parties indicated that a ruling in this case could extend beyond health plan benefits to overpayments in pension plans and disability plans. What kind of hardship would be created if the overpayment was caused by an error on behalf of the plan sponsor?

Would the participant know if he or she was overpaid in a defined benefit plan, for example? What would happen if such error was not discovered until years later? What if the error was discovered after the participant had already retired?

The oral arguments addressed the need for a narrow ruling, in that such ruling in Montanile should apply to health plans involving a “knowing dissipation” of a personal injury settlement to avoid some of the ripple effects described above. However, such ruling is now in the hands of the Justices.

Jennifer S. Kiesewetter, Esq. Kiesewetter Law Firm, Pllc jkiesewetter@kiesewetterfirm.com www.kiesewetterfirm.com

Mock Trial SHRM-Memphis held a mock trial which simulated a real federal jury trial at the Holiday Inn-University of Memphis on November 17, 2015 before 68 SHRM members. This mock trial was based on claims of the Plaintiff, Daisy May, who worked as a payroll clerk for the fictional company, Cashmaker Manufacturing Company. In this lawsuit, Ms. May alleged that the CFO of Cashmaker, Dan Bedfellow, sexually harassed her after concluding a three year affair, and that once Ms. May told the HR Director, Holly Martinette, about the sexual harassment, the company fired her in retaliation for making the claims. In addition, Ms. May also brought a claim for violations of the Fair Labor Standards Act (FLSA), alleging that Cashmaker failed to pay her overtime for time she worked at lunch off the clock. There was an opening statement, direct and cross examinations of the witnesses, objections to testimony, and a "federal district" judge who was firmly in control of the proceedings. The audience acted as the jury in this squirminducing set of circumstances.

Representing the Company was Bob Williams, and representing the Plaintiff was Emma Redden, both attorneys at Baker, Donelson, Bearman, Caldwell & Berkowitz P.C. Other participants in the mock trial were Charlene Mitchell, the Human Resources Manager for Huey's Restaurants, Mary Kay Allen, Vice President of Human Resources at Orgill, Inc., Kelli Kelly, Director of Human Resources at Orgill, Inc., Kevin McDougall, Training and Development Supervisor, Lucite International, and John Wallace, President, JMW Associates, LLC.

At the conclusion of the trial, Bob Williams provided an overview of the legal issues in the lawsuit and the circumstances that often give rise to those issues. He identified some of the many areas where the Company could have prevented such claims, such as having a fraternization policy, having a written anti-harassment policy that is enforced, providing training on sexual harassment in the workplace, and evaluating employees' status under the FLSA as exempt or non-exempt to ensure that overtime violations do not occur. This interactive mock trial put everything in perspective as to why it is so important for a company to have good policies and procedures in place, and to actually follow them; and proper training of managers, so that it can defend employment claims in court.

Pictured (L-R): Mary Kay Allen, (“Holly Martinette”); Charlene Mitchell, (“Daisy May”); Kelli Kelly, (“Clerk/Bailiff”); “Federal District Judge” John Wallace; Emma Redden, (Daisy May’s counsel); Bob Williams, (“counsel for Cashmaker Mfg. Co.”); and Kevin McDougall, (“Dan Bedfellow”).

A LITTLER EVENT Thursday, February 11, 2016 It’s a Labor of Love: Littler Lawyers Answer Your Most Burning Employment & Labor Questions Just in Time for Valentine’s Day Presented by: Lisa Lichterman, Paul Prather and Tanja Thompson Registration: 3:30 p.m. – 4:00 p.m. | Program: 4:00 p.m. – 5:00 p.m. | Social: 5:00 p.m. – 6:00 p.m.

Location: Littler Memphis | 3725 Champion Hills Drive, Suite 3000 | Memphis, TN 38125 For registration, please contact Claire Krummenacher at ckrummenacher@littler.com.

littler.com 3725 Champion Hills Drive, Suite 3000 | Memphis, TN 38125 | 901.795.6695

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Impact of Social Media in the Workplace:

The Role of Human Resource Professionals

By BRIGITTE TUBBS-JONES

In recent years, the use of social media has affected nearly every aspect of our culture and the workplace is no different. As more forms of social media are introduced, their impact on the workplace is heightened. While we are still waiting for federal legislation and a significant amount of case law in this area, many states have made great strides by enacting laws regarding social media.

In the world of Human Resources, social media can be used for many important purposes, including recruiting talent, showcasing your organization, recognizing stellar employees, as well as keeping your clients and customers informed. Challenges arise when trying to balance the free speech rights of employees with concerns of employers in their efforts to foster a bully-free, productive work environment. Human Resource professionals play a monumental role in advising both employees and employers of the risks that may result when social media is used in an inappropriate manner.

Let’s take a look at social media from an employee’s perspective. Increasingly, we see employees posting on social media about their dislike (or less common, love) of their job, negative comments about their supervisor or coworkers, or issues with the condition of their physical building or office. Many employees feel like they are entitled to make whatever statements they like about their supervisor, coworkers, or work environment because of their First Amendment rights, and that there is nothing the employer can do about it. Well, that’s not completely true. Many employers have issued disciplinary actions, including terminations, as a result of social media posts by employees. The basis for these disciplinary actions usually arises from violation of the organization’s social media policy or anti-discrimination and harassment policy. On the other hand, the National Labor Relations Board (NLRB) has deemed some social media posts by employees to be protected if they have met the threshold of being concerted and protected communication. The NLRB began receiving charges related to discipline to social media posts and employer social media policies nearly five years ago. Three memos designed to provide guidance on this issue were issued by the NLRB Office of General Counsel in 2011 and 2012 which included investigation results from numerous social media cases. In late 2012, the NLRB began to issue decisions in cases where employees were disciplined for social media posts.

So what about the employer’s perspective of social media use by employees? Employers recognize the employee’s First Amendment rights, but weigh that against their desire for 34

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a cooperative workplace, free from the bullying and harassment that may result from one or more employee’s social media posts. Employers are also cognizant of the organization’s social media image or reputation which could be tarnished with merely a single negative post. Another concern of employers as it relates to social media is the time spent by employees during working hours either posting or reviewing social media sites. A 2014 survey conducted by Salary.com revealed that 14% of employees surveyed rated social media as a top time waster and influence on productivity.

Human Resource professionals need to stand ready to meet the challenges posed by both the employee and employer. My first recommendation would be to create a social media policy- if you have not already done so-, for your organization. There are lots of examples out there, ranging from a one page policy to a policy that spans more than ten pages. There is no “one size fits all” approach when it comes to creating a social media policy. Keep in mind that the policy should reflect the organization’s culture. A good policy will set expectations for employees, outline the potential for disciplinary action that may result from violation of the policy, and protect the organization. The NLRB has recommended that employers not create overly broad policies, whereby activities protected by federal labor law, such as the discussion of wages or working conditions among employees, are prohibited.

Once you have a good social media policy in place, employees need to be trained about the policy. Thoroughly training employees about the policy will ensure that employees are informed and may result in fewer violations as opposed to simply implementing the policy and providing no training to employees. The policy should be a breathing document, subject to review and revision by your organization’s legal team and HR professionals as advancements are made in the law or as changes are made within the organization.

So what’s next for social media and the law? On the state level, eighteen states have passed legislation that bans employers from requesting access to personal social media accounts of employees.

Similar legislation has either been introduced or is pending in nearly all of the remaining states. On the federal level, there have been two attempts to pass a federal social media workplace privacy law, but so far both have stalled out. Stay tuned to see what’s next.

Brigitte Tubbs-Jones, Esq., PHR, SHRM-CP Brigitte.Tubbs-Jones@tn.gov Director of Legal Services for the Tennessee Department of Human Resources

Labor & Employment Law Section

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1 Mary Hamm with Burch Porter & Johnson was vice-chair of the MBA Labor and Employment Law Section of the Memphis Bar Association in 2015.

2 Imad Abdullah, Assistant General Counsel at Regional One welcomed over 125 attorneys and HR professionals to the annual event at the University of Memphis Holiday Inn. 3 David Lopez, General Counsel of the EEOC, spoke on the Top 10 Litigation Developments at the EEOC. 4 Katharine Kores, Director, Memphis District of the EEOC.

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5 & 6 Jennifer Hagerman with Burch Porter & Johnson presented a review of significant labor and employment law decisions in the Western District in 2015 along with David Rudolph with Bourland Heflin Alvarez Minor & Matthews.

7 Brian Faughnan with Lewis Thomason highlighted developments with Tennesseeâ&#x20AC;&#x2122;s ethics rules.

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8 (L-R) Alan Crone, Crone & McEvoy; Angie Davis; Baker Donelson; and Judge Sheryl H. Lipman discussed Supreme Court & Sixth Circuit updates.

9 Judge Diane Vescovo, USDC for the Western District of Tennessee; Allen Blair, Blair Mediation; and Billy Ryan with Donati Law Firm presented a panel discussion of the Western Districtâ&#x20AC;&#x2122;s Mediation Plan.

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10 Tanja Thompson, Office Managing Partner at Littler in Memphis , led a discussion about the NLRB with Barry Kearney, NLRB Associate General Counsel, Division of Advice. 11 Eileen Kuo with Jackson Lewis and Darryl O'Neal with The Law Offices of Darryl O'Neal presented a Tennessee State Law Update.

12 Hon. Kevin Sharp, USDC for the Middle District of Tennessee; David Sanford, Sanford Heisler Kimpel provided tips on FLSA claims. www.HRProfessionalsMagazine.com

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7 Habits of Leaders Who Inspire Powerful Loyalty

By HARVEY DEUTSCHENDORF

Encourage and Support Those Under Them in Their Development The best leaders are continuously looking for ways to support their staff to develop themselves, not only in the workplace but also in areas of their personal lives. They look for opportunities to challenge those under them and use their resources to provide training and opportunities to advance in the organization. If the type of opportunities are not available within the organization, inspiring managers will do all they can to try to set them up, even looking for help outside the organization to do so. Inspiring leaders are more afraid of their staff stagnating than they are of losing them to other organizations after they have spent time and resources developing them.

Support and Trust Their Staff Inspiring leaders push staff to go beyond their comfort zones and are there to support them. Having the confidence of their leader, staff are more apt to take on challenges and risk failure. Staff who know that their leaders have their backs, are more apt to take risks than those who fear the consequences of making mistakes.

Share Their Values and Ideas

In July of 2011, an article appeared in Psychology Today asking the question;

“Is loyalty dead?”

It wasn’t the only article that was wrestling with the same concerns that were running through business circles. The notion of decreasing loyalty in the workplace has been steadily spiralling downward for decades. Today people in their 20’s change jobs an average of every two years. The old contract of loyalty whereby the employee stayed with the organization in exchange for lifetime security has been gone for some time now. Despite the general level of loyalty to an employee is decreasing, there are still organizations which inspire high levels of loyalty. While a number of factors come into play in the loyalty equation, leadership is still a major one.

Here are 7 attributes and how leaders inspire loyalty in those under them.

Are Authentic Nobody likes to work for a phoney. While they may have been tolerated in the past out of a need for security at work, younger generations are increasingly unwilling to accept direction from people they have little respect for. Authentic leaders can be counted on to say what they mean and do what they say. They are the same person to their staff, to those above them, their customers and partners.

Genuinely See Their Purpose as Serving Those Under Them Loyalty inspiring leaders sincerely see their part as role modelling, motivating and improving those that they lead. They see their staff as more than a stepping stone towards, or a means to, their own promotion up the ladder. They find meaning and purpose in advancing and bringing out the best in those that they lead. Success to them is counted in the number of people that they have helped advance in the organization. In private conversations regarding their work, they love to include stories about those employees and their accomplishments.

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Leaders who inspire those under them are open and transparent with their values and ideas; sharing them enthusiastically and openly at every opportunity. Their followers never have to guess where they are coming from. They make it very clear to their staff what it takes to be successful in the organization and share where they see the organization is going.

Their positive energy and belief in those they are working with is contagious and boosts the energy of those around them.

Jump In and Help Out Whenever They Can Regardless of what position they hold, inspiring leaders take the opportunity to work alongside those that they lead every chance they get.

Regardless of their rank, they never see any work that their staff do as being too far beneath them to participate in. If emergencies strike, leaders who inspire are the first ones on the scene and offering to do whatever is necessary to get the job done. He/she demonstrates they don’t expect anyone to do a task that they themselves are unwilling to do.

Take a Genuine Interest in the Lives of Their Staff Talk to any inspiring leader and they will be able to share an amazing wealth of information about their staff, not only their work history but their families, hobbies and interests outside of work. They are well aware that staff have lives outside of their work and there are a lot of outside factors that impact their work performance. Managers who are there to support their staff in all areas of their lives which in turn, inspires much greater loyalty than those who show no interest, or concern in their personal lives. The sign of an inspiring manager is one who gets invited to major events that their employees are celebrating and is commonly included in group events that staff organize.

Harvey Deutschendorf is an emotional intelligence expert, author and speaker. To take the EI Quiz go to theotherkindofsmart.com. His book THE OTHER KIND OF SMART, Simple Ways to Boost Your Emotional Intelligence for Greater Personal Effectiveness and Success has been translated into 4 languages including Chinese.

You can follow him on Twitter @theeiguy.

suggest readers take a linear approach. Rarely among industry books have I encountered a Forward and Preface so relevant to the chapter content. In other words, begin at the front and continue onward. You will not be disappointed.

Business-Focused HR:

11 Processes to Drive Results

By WILLIAM CARMICHAEL

Though written for mid-level to advanced HR practitioners, Business-Focused HR: 11 Processes to Drive Results by Scott Mondore, Shane Douthitt, and Marisa Carson is a must-read that even less seasoned HR professionals will find resourceful. The book’s fundamental purpose is to provide a practical roadmap to show leaders how to build, execute, and demonstrate the impact that HR processes have on business outcomes. Equally impressive is that the authors were specifically asked to write this book by the Society for Human Resource Management (SHRM), a request which clearly indicates the need for timely and practical applications of HR processes and their resulting return on investment (ROI) within organizations. There is consensus throughout the field that HR processes and the strategies that drive them are often too subjective to quantify. After all, even the most critical HR processes, if overly subjective, may not always have tangible results for leaders to demonstrate. But, as the authors aptly state, HR strategies that are data-driven and evidence-based do have a calculated ROI. Business-Focused HR: 11 Processes to Drive Results is therefore relevant, timely, and needed.

Regardless of the industry or size of the organization, HR professionals face a formidable task: building and managing productive HR processes and functions. The authors begin by establishing the cause-and-effect relationship between any HR initiative and intended business outcomes. Take, for example, employee selection. As one of the most researched HR processes, it can become a valid, reliable tool when interviewers are using critical competencies (i.e., knowledge, skills, abilities, and needed behaviors) each time, as opposed to the unstructured process wherein guessing becomes the norm. But these authors have taken it a necessary step further by carefully combining the structured interview requirements with business analytics needed by both HR and organizational leaders. The authors refer to this as The Business Partner Roadmap, six steps that assist organizations in linking employee data to business outcomes: 1) Discover Critical Outcomes, 2) Creating a Cross-Functional Data Team, 3) Assess Measures of Critical Outcomes, 4) Objectively Analyze Key Data, 5) Build the Program and Execute, and 6) Measure and Adjust or Reprioritize. It is this linking of employee data at each step that makes Business-Focused HR so effective.

Moreover, HR veterans will find the book’s layout and functionality useful for its relevance and immediacy of application. Each of the thirteen chapters “focuses on a key HR process, describing (1) where it has been and where it is today, (2) how it is best executed to lead people based on applied research and practical experience, and (3) how to make the HR process more businessfocused.” As with my previous example of employee selection (the basis for Chapter 1), a very linear decision process is not just a necessity but becomes easily achievable with the practical steps and reasons listed. Thus, the Who, What, When, Where, How, and Why of the process are all aimed at supporting the partnership between HR and senior business leaders. Perhaps most significantly, as the authors attest, this provides a means for HR to “have a seat at the table.”

As a former HR professional myself, I found the book’s organization particularly helpful. Here, the authors structured the chapter topics in a logical manner; i.e.; employee selection to performance management, then employee training to career development, followed by a discussions of work/life balance and so on. Although the chapters can be read individually, I strongly

Less seasoned HR professionals will find a friendly consistency with each chapter indicating current research findings on a specific HR process, including a practical synopsis. There are also useful execution tips from beginning to end, as well as strategies for presenting HR initiatives to senior leaders and suggestions for overcoming potential obstacles. Additionally, the authors provide a means for linking the HR processes to relatable business outcomes with the steps needed to determine and present its ROI to their leadership, which has often been troublesome for both HR and many other organizational departments. The organizational mastery of analytics as well as the validity and reliability of its data have also been complicated endeavors. Thus, Business-Focused HR: 11 Processes to Drive Results makes a huge leap forward by taking the mystery and complexity out of these important topics.

Reader emphasis must also be given to the importance of the book’s two Appendices: A) Data Analytics and B) Reliability and Validity. First, regarding Appendix A: For readers who are less familiar with this concept, data analytics is the science of examining raw data with the purpose of drawing conclusions about that information. Here the authors make known the importance of making “minor investments in statistical software” (i.e., SPSS/AMOS as well as encouraging organizations to carefully align themselves with individuals knowledgeable in data analytics.)

As mentioned earlier, it is this analysis of HR data that allows clarity of cause-and-effect relationships between any HR initiative and intended business outcomes. Appendix B, on the other hand, deals specifically with the reliability and validity of data.

Validity of an assessment is the degree to which it measures what it is intended to quantify. This is not the same as reliability, which is the extent to which a measurement gives results that are consistent. For this section, the authors provide simple explanations of key statistical concepts.

Thus, while Business-Focused HR: 11 Processes to Drive Results is primarily written for mid-level to advanced HR practitioners, its utility and readability are furtherreaching. The book is extremely well written and serves well as an academic reference guide for anyone in HR and other departments of business leadership.

William Carmichael, Ed.D Strayer University william.carmichael @strayer.edu www.strayer.edu www.HRProfessionalsMagazine.com

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SHRM-Memphis Board of Directors

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Financial Planning has never been more important than it is today! Changes in the economy, taxes and interest rates have made every financial picture more complex than ever before.

We focus on: Financial Needs Analysis Retirement Income Planning Disability Income Protection Life & Health Insurance Long Term Care Insurance Guaranteed College Scholarships College Funding Solutions Executive & Employee Group Benefits Charitable Contribution Strategies

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