July 2016 issue

Volume 6 : Issue 7 TM

www.HRProfessionalsMagazine.com

Mandatory E-Verity

in Tennessee

The Threat of

Litigation

to Small And Mid-Size

Pension Plans

The Defend

Top Educational Programs for HR Professinals The Uber Case –

Independent Contractor v.

Employee

Claire Shapiro,

SHRM-SCP, SPHR, CCP

Chief Human Resources Officer for Rhodes College

Trade Secrets Act Increase to the

Exempt Status Wage Threshold

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Bringing Human Resources & Management Expertise to You New DOL OT Rule allows

10% of earnings from

non-discretionary bonuses, incentive pay or commissions to satisfy new threshold if paid quarterly. 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 Chris Davis Harvey Deutschendorf Kristy L. Gunn Paula Hayes Howard B. Jackson Jennifer Kiesewetter Meghan K. McMahon Abtin Mehdizadegan Joe Meyer Mary Mosqueda Robert D. Meyers Robert Ratton Clifford Stephan Larry Tolbert Sonya Weathers 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

5 Profile: Claire Shapiro, CHRO for Rhodes College 8 In Memory of George E. Mabon, PHR

WEB EXCLUSIVES

26 Top Education Programs for HR Professionals

HTTP://HRProfessionalsMagazine.com /Exclusive

20 12 Tips to Minimize Workplace Conflict 36 Is Silicon Valley Losing Its Soul?

42 7 Reasons that Emotional Intelligence is Quickly Becoming One of the Top Sought After Job Skills 44 Book Look: The Art of Communication – Your Competitive Edge

Employee Benefits

Next Issue

12 The Threat of Litigation to Small and Mid-Size Pension Plans

Highlights from the 2016 Annual SHRM Conference in Washington, DC Retirement Planning and Compliance

24 Is Your Company’s Health Plan Creating Personal Legal Exposure to Your CFO and HR Executives?

34 Prohibiting Discrimination Under the ACA

Employment Law

10 Strange Bedfellows: Sexual Harassment in the Connected Office 14 Increase to the Exempt-Status Wage Threshold

16 The Uber Case – Everything Old is New Again – Or is It? 18 The Defend Trade Secrets Act

32 Transgender Bathroom Access in the Workplace

40 How Can Employers Defend Discrimination Claims After Vawter v. DuPont?

Industry News 6 Preview of 32st Annual KYSHRM State Conference in Louisville August 30-September 1 7 Preview of ARSHRM Employment Law and Legislative Conference in Little Rock September 15-16

9 Preview of TNSHRM State Conference in Memphis September 14-16

21 SHRM-Memphis HR Compensation Forum August 12 22 Thank you MSSHRM Exhibitors May 16-18 in Biloxi

38 New HRCI Certification Exam Prep Classes Begin August 16

39 Preview of SHRMGA State Conference in Augusta September 18-20 www.HRProfessionalsMagazine.com

3

a note from the Editor

Some of the hot topics we are covering in this issue include mandatory E-Verify for Tennessee, the

It was great seeing former SHRM CEO & President, Sue Miesinger at the 2016 SHRM Conference in Washington, DC.

Uber Case - independent contractor v. employee, the threat of litigation to small and mid-size pension plans, the Defend Trade Secrets Act, and of course, the increase to the exempt status wage threshold. We appreciate our sponsors who contribute these articles to keep you educated and informed in the ever-changing world of human resource management.

Looking forward to fall, the 32nd Annual KYSHRM State Conference will be August 30-September 1 in Louisville. Then we will be in Memphis for the

I

TNSHRM Annual State Conference on September am writing this column from the Walter E. Washington Convention Center in Washington, DC where the 2016 SHRM Annual is taking place. It is one of the largest ever with over 15,000 HR professionals in attendance and over 600 exhibitors. It is very exciting to be here, and I hope you are followed me on Facebook, LinkedIn and Twitter as I brought you the latest from the Conference. There is nothing more fun than being in Washington, DC in an election year! We will bring you highlights of this excellent conference in our August issue.

14-16. Then its on to Augusta for the SHRMGA Conference September 18-20. As always, we will be bringing you highlights from these important conferences on Twitter, Facebook, and Linked In. I hope you were able to join us June 28 for our complimentary HRCI |SHRM Virtual Event sponsored by Data Facts as we brought you hot

We are pleased to have Claire Shapiro, CHRO, for Rhodes College in Memphis, on the cover of our July issue as we salute top educational programs for HR professionals. I think you will be quite impressed with Claire's many accomplishments and continued success in our industry.

topics from the 2016 SHRM Conference. Watch your email for your invitation to our July event! If you are not currently receiving our monthly invitation, you can subscribe on our website at www.hrprofessionalsmagazine.com.

I recently completed our first online SHRM CP| SCP certification exam prep class, and it was fantastic! I learned a lot about the new certification, and I look forward to sharing this knowledge with those of you who are seeking this new certification. I will be offering our next PHR |SPHR online certification exam prep class in August. I think both certifications are excellent, and I will continue to offer both of them as long as you are interested. It is a very convenient way to study for the exam in the comfort of your own home. Each class is recorded so that if you miss a class, you can catch up as you have time. The deadline to register is August 11. Classes begin on August 18.

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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Cynthia@hrprosmagazine.com Twitter @cythomps

Claire on the cover

REVELS SHAPIRO

CLAIRE REVELS SHAPIRO, SHRM-SCP, SPHR, CCP Chief Human Resources Officer, Rhodes College For the past twenty-two years, Claire Shapiro has enjoyed working with the faculty, staff, and students as Photography by Justin Burks

the Chief Human Resources Officer at Rhodes College in Memphis, Tennessee. While working in this role with its many unexpected challenges, Claire is able to create an environment that fosters professional and academic achievement and to help move the College’s strategic initiatives forward.

Claire has worked in three industries in her career. She has served in banking, health care, and higher

Giving back to the Memphis community is very important to Claire. She is an advisory board member for the Baptist Memorial Hospital for Women and Pediatrics, a member of the Junior League of Memphis Sustainers’ Board, and a sustaining member in the Lebonheur Club. Claire was also President of the Germantown Arts Alliance.

education in various roles ranging from financial analyst to cost accountant to business development to CHRO. Her ability to not only cope with change but also lead in the face of change have been the hallmarks of her career in addition to her flexibility, positivity, and sense of humor.

Working with students and their families this past year as the Title IX Coordinator at Rhodes has been perhaps the most challenging assignment during her many years of service with the College. She looks forward to returning to a more traditional HR role at the end of the year just in time to face the FLSA recent regulation changes that will challenge HR Officers and CFOs alike.

Claire has been the President of the Memphis Business Group on Health (MBGH) for the past eleven years.

MBGH is a Memphis employer’s coalition for employee health insurance to bring quality and value for local healthcare purchasers. She is a member of the College and University Personnel-HR Association, Mid-South Compensation Association, and the Executive Roundtable for SHRM-Memphis.

Claire earned both her B.S. in Finance (Beta Gamma Sigma) and her M.B.A. from Louisiana State University and was awarded the Leadership Development Certification in HR from the Center For Creative Leadership.

Claire is certified by the Society of Human Resource Management as a SHRM-SCP and is also certified as an SPHR by the Human Resource Certification Institute. In addition she is a Certified Compensation Professional (CCP). 

www.HRProfessionalsMagazine.com

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7

In Memory of George E. Mabon

January 13, 1962 – May 21, 2016 “ With any gifts, riches, skills or talents with which one is blessed, it is essential to give back to one’s community, by sharing in both financial ways and personal activity.” - George E. Mabon George E. Mabon served more than 30 years in Human

Child Advocacy Center, and was the 2015 recipient of the

Hilton Hotels); Manpower, Incorporated; and, most recently,

passionate commitment and invaluable contributions toward

Resources including positions with Promus Hotels (now

Memphis-Shelby County Airport Authority where he served as Vice President of Human Resources.

George was an active member of the Society for Human Resources Management (SHRM) for more than 20 years

and was certified as a Professional In Human Resources

(PHR.) He held several positions on the local SHRM –

Memphis board. George was also a member of the Planning Committee for the SHRM Memphis Executive Roundtable.

He was also a founding and active member of the Airports

the Center’s mission.

George served on the Board of Trustees for Memphis College of Art and previously served on the Board of Directors and

as Board Chair for Friends For Life, Inc. He was an Advisory Board Member for the Memphis Film Forum; previously

served on the board for the Alliance for the Blind and Visually Impaired; Victorian Village, Inc., The Playhouse on the Square; and the Saint Martin de Porres Shrine and Institute.

Council International – North America (ACI-NA) Human

George was an active member of St. Peter Church where he

Resources Committee, which is a consortium of HR practi-

served as a Eucharistic Minister, Lector, Commentator and

tioners in Aviation.

worked on the St. Martin De Porres Shrine & Institute.

George was among Memphis’ most prominent civic leaders.

George attended Carver High School and the University

Member. He served as Chair of the Board for the Memphis

Resource Management from Hamilton University.

He was a Leadership Memphis graduate and previous Board

8

Nediva Award, which honors a volunteer who has made a

www.HRProfessionalsMagazine.com

of Memphis. He received a Bachelor of Science in Human

T

Strange Bedfellows:

Sexual Harassment in the Connected Office

By ROBERT RATTON

he story of the office romance is as old as the workplace itself. Hollywood has carved out a cottage industry based on the hapless romantic stumbling upon love at the water cooler. However, not all of these moments end like Jerry McGuire. Occasionally,

the awkward co-worker’s dedicated advances end in a stalking charge instead of eternal love. It’s these moments, when Cupid’s aim may not be spot-on, that lie at the heart of sexual harassment claims.

In the world of Don Draper and the three-martini lunch, sexual harassment is as easy to spot as the villain in a Rocky and Bullwinkle cartoon. Movies and TV perpetuate this image of the lascivious man propositioning the young ingénue to exchange opportunity for affection. In the mind of the general public, sexual harassment is a quid pro quo offer, a late night meeting over drinks and wandering hands.

The explosion of social media over the past five years has changed the look and form of sexual harassment. Currently, Facebook boasts approximately 1.55 billion monthly users, a 14 percent increase over 2015. Of particular importance for the employer, the most heavily trafficked time period for Facebook users is between 1 and 3 p.m. Snapchat, a company that was only a concept in 2011, has over 100 million users.

Co-workers are connected now through means of communication far beyond late night calls and veiled innuendo. People gain access to personal lives of co-workers in far greater detail since the advent of Facebook and the smartphone. When love goes sour in the 21st century workforce, social media allows the dejected party new and forceful ways to reach out to the former object of affection.

Furthermore, the problem becomes even more complicated, given the shifting demographics of the modern workforce. While Don Draper ruled the roost with a gaggle of heterosexual men, the modern harasser is not confined to a specific gender or sexual preference. Courts now routinely hear cases of female-to-male and same-sex harassment that pose every bit of the risk of legal liability and disruption to the work environment as the traditional concept. The responsibility of the modern human resources practitioner is to peek behind the veil of social media and stereotypical behavior to stave off issues before they become real problems.

This view of sexual harassment has obscured the reality of the problem in today’s modern workforce. A poll featured in the venerable publication of all that is salacious, Cosmopolitan, highlights this problem. In this study, over 2,000 women were asked if they had been a victim of sexual harassment. Only 16 percent initially answered “yes.” When the interviewer explained that sexual harassment can include sexual remarks and innuendo, over 80 percent of the women stated they had suffered some form of harassment.

The connected workforce has not changed the fundamental definition of sexual harassment. An employee has a claim when sexual harassment becomes “sufficiently severe or pervasive to alter the conditions of employment and create an abusive working environment.” Meritor Sav. Bank, FSB v. Vinson. The change has occurred in how courts and lawyers have applied this traditional definition. Two cases from the end of last year highlight this new reality.

Of these women who answered in the affirmative, over one-third of these incidents of harassment occurred over electronic means, such as text messages, revealing personal information after a Google search and social media. In a 2014 study by the Pew Research Institute, four of every 10 internet users have been the victim of some form of harassment.

Few cases skew further from the traditional idea of sexual harassment than a recent case from Florida. In this case, the plaintiff, Mr. Smith, worked as a mild-mannered salesman over

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1. THE CASE OF THE SHY FIREMAN

plumbing accounts. However, a decade prior to his office life, Mr. Smith posed as a fireman sans safety gear for a popular adult-oriented magazine. In a turn that will surprise no one, his co-workers were ecstatic to discover this bit of personal history, dedicating considerable time to “googling” images of him and yelling “fire alarm” when he entered officer meetings. When Mr. Smith went to his supervisors about this conduct, they generally echoed the (understandable) sentiment of the co-workers that the whole matter was hysterical.

While Mr. Smith might have been an exemplary naked first responder, he was a disaster as a salesman and was eventually terminated for failing to meet his sales goals. Smith brought suit against his employer for sexual harassment, hostile work environment, retaliation based on the comments made by his co-workers and lack of action by supervisors. The employer moved to dismiss the case, claiming that the comments were nothing more than office banter.

In its denial of the motion for summary judgment, the Court did not consider whether Mr. Smith should have reasonably expected that his pictures in a nationally publicized magazine might later come back to haunt him. Instead, the Court stated that the co-workers’ comments were motivated by either sexual desire or his gender. Accordingly, the case is allowed to go forward to trial to the great delight of Florida jurors.

was dragged into the office by the use of modern technology. It is hard to imagine this behavior taking place without the veil of the internet. In Mr. Smith’s case, co-workers probably would not have plastered embarrassing (albeit purportedly flattering) naked photos of a co-worker across the office. Similarly, a decent manager is highly unlikely to ask a subordinate to drop trou for the camera in a face-to-face encounter. However, all of these people felt comfortable making such advances over the distance created by today’s technology.

Similarly, after these acts occurred, management was unable to wrap their heads around how these seemingly flattering advances were harassment.

Not to denigrate my gender, but we are not traditionally thought of as averse to flattery no matter how coarse. One of the managers in the Smith case went so far as to point out his photos were “nothing to be ashamed of.” Giving them the benefit of the doubt, these co-workers and supervisors were under the impression, false or not, that their actions were nothing more than good-natured fun.

Nevertheless, nothing ends a good time like a termination. Both managers failed see any threat, and their employers now need to get out the checkbook. Love may be blind, but managers and human resources need to keep their eyes open to new situations that damage office morale and expose employers to liability.

2. A SPECIAL MISSION

Almost all human resources practitioners are aware that any claim of sexual harassment should be investigated. However, this concept sometimes gets lost on management in the social media context. The defendants in Isenhour v. Outsourcing of Millersburg, Inc., are now acutely aware that outside social media posts can constitute sexual harassment in the workplace. The plaintiff in this case, Johnny Isenhour, was a 37-year-old Army veteran who worked for the defendant. As is common in most workforces, members of management would retreat after work to a local watering hole to mull over the issues of the day. Unfortunately for Outsourcing of Millersburg, management’s post-work musings focused more on Mr. Isenhour’s physical attributes, decidedly unrelated to any of his administrative duties. Of greater concern for the defendant, one of Mr. Isenhour’s managers sent him a text message requesting that he provide photographic evidence of the form and functionality of this attribute. Not impressed, Mr. Isenhour went to another manager to complain about the text, as well as other instances of inappropriate touching and suggestive behavior. Instead of looking into the situation, the manager recommended that Mr. Isenhour attempt to ignore the unrequited efforts of management.

The Court was less than impressed with Outsourcing of Millersburg’s defense that requests for pictures of a private nature were a part of regular office banter. The Court clearly stated that requests for intimate pictures, along with other suggestive behavior, could easily be seen as physically threatening and humiliating, regardless of the gender of the target or the time in which the messages were sent.

Practical Steps to Prevent and Respond to Sexual Harassment in the Connected Office These cases highlight some of the issues in the modern, connected office. Sexual harassment extends far beyond traditional conceptions of a harassment victim. In both cases, conduct that occurred off the clock

Robert Ratton, Attorney Fisher Phillips rratton@fisherphillips.com www.fisherphillips.com

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The Threat of Litigation to Small and Mid-Sized Pension Plans

By LARRY J. TOLBERT, AIF,© MBA, CEP

The best defense is a good offense.

This truism is often overheard during watercooler conversations about football teams. Others might recognize it as the Strategic Offensive principal of war.

Whether your team is throwing footballs or hand grenades, the message is clear and powerful: proactivity trumps passivity.

And this is most certainly true for administrators and trustees of employee benefit plans.

Just weeks ago, plan participants filed suit in federal court about the stewardship of a Minnesota auto body company’s 401(k) plan which in 2014 had less than $10 million in assets and just more than 100 active participants.

Furthermore, a trustee must “systematically consider all the investments of the trust at regular intervals” to ensure appropriateness.

The High Court did not issue an opinion on the specific scope of Edison’s fiduciaries to review and monitor the investments in question but remanded the case to the 9th Circuit Court with instructions to reconsider plaintiffs’ claims in light of the “analogous trust law.”

While mega plans have most often been the focus of litigation, the universe of smaller plans is significant.

The Employee Benefit Research Institute has determined there are more than 4.2 million workers with retirement savings in nearly 75,000 plans with assets of $25 million or less.

Some wonder whether the lawsuit against tiny LaMettry’s Collision Inc. may be the first in a wave of new cases against small- and mid-sized 401(k) plans.

Larger plans can use their size as leverage to negotiate better deals than these smaller plans. As a result, smaller plans typically carry higher fees and may appear to be more vulnerable to excessive fees lawsuits.

From 2000 to 2014 the average fees paid by 401(k) investors declined about 30 percent, according to the Investment Company Institute (ICI), which also found that from 2009 to 2012 the largest declines in fees occurred in plans with assets under $1 million.

Still, the best defense is a good offense.

In the suit filed May 18 in Minnesota, participant representatives alleged plan fiduciaries at LaMettry’s Collision Inc. breached their duties under the Employee Retirement Income Security Act of 1974 (ERISA) by allowing excessive fees to be charged for investments, record-keeping and administration.

Employers with retirement plans are obligated to act in the best interests of participants, obligated to monitor plan fees and service providers and face potential personal and professional liability if they fail to do so.

The complaint alleged defendants did not follow a prudent process to evaluate service providers and assess the reasonableness of fees. As a result, the complaint said, participants overpaid hundreds of thousands of dollars in fees and suffered from reduced overall investment returns.

The best way for employers to manage their risks and ensure reasonable fees is to conduct a periodic review of their retirement plans.

Excessive fee lawsuits by 401(k) participants have increased in frequency over the past decade, according to Pension and Benefits Daily, and most often the cases have been brought against mega benefit plans with billions in assets.

The publication noted 401(k) participant suits brought against Verizon Communications Inc. with 401(k) assets of $30 billion; Chevron Corp. with $19 billion; Intel Corp. with $14.9 billion; American Airlines Inc. with $9.1 billion; Anthem Inc. with $5 billion and M&T Bank Corp. with $1.9 billion, among others.

There have been some settlements. After years of litigation, Lockheed Martin Corp. entered a $62 million settlement agreement and Boeing Co. reached a $57 million settlement with its workers. Both settled in 2015.

The U.S. Supreme Court also addressed fiduciary responsibilities and excessive fees this past year in a 9-0 decision in favor of Edison International’s 401(k) plan participants.

“ERISA’s fiduciary duty is derived from the common law of trusts, which provides that a trustee has a continuing duty–separate and apart from the duty to exercise prudence in selecting investments at the outset—to monitor, and remove imprudent, trust investments,” wrote Justice Stephen Breyer, who delivered the opinion for the court.

A trustee “has a continuing duty to monitor trust investments and remove imprudent ones. This continuing duty exists separate and apart from the trustee’s duty to exercise prudence in selecting investments at the outset,” Breyer wrote.

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They should evaluate services the plan needs. They should evaluate provider compatibility, associated costs and investment options. They should establish a baseline for comparison and systematically benchmark plan services and fees. They should document the process throughout. And once completed, employers should clearly see whether they need to adjust services or fees to reflect market rates.

A comprehensive plan review does not need to be an overwhelming proposition. Engage an experienced plan advisor or independent consultant to be your guide. It will save time and reduce stress.

Larry J. Tolbert, AIF,© MBA, CEP Founder, Radian Partners LLC Larry.Tolbert@radianpartners.net www.radianpartners.net ABOUT RADIAN PARTNERS Radian Partners, founded in 2004, operates from offices in Memphis and Franklin in Tennessee. The firm provides financial education courses regularly in Middle and West Tennessee, most often through its association with the UT Martin Office of Extended Campus and Online Studies, among other colleges and universities.

Securities, insurance and advisory services offered through FSC Securities Corporation, member FINRA/SIPC. Additional insurance services offered through Radian Partners. Listed entities are not affiliated with FSC Securities. 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.

Increase to the Exempt-Status Wage Threshold New Overtime Rule to Take Effect December 1, 2016

By MARY MOSQUEDA and JOE MEYER

Since 1940, the Department of Labor (DOL) regulations have generally required three tests to be met for the Fair Labor Standards Act (FLSA) exemption to apply:

Salary Threshold On May 18, 2016, the DOL released the changes to the final overtime rule, which raised the salary threshold at which an employee is eligible to be classified as exempt from $23,660 to $47,476 annually.

Any employee currently classified as exempt must start earning a fixed salary of at least $913/week in order to retain his or her exempt status. If the employee does not earn at least this amount, he or she no longer can be classified as exempt and will be entitled to overtime pay beginning December 1, 2016.

Bonuses/Commissions e employee must be paid a predeTh termined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed. (Salary Basis Test)

e amount of salary paid must Th meet a minimum specified amount.

(Salary Level Test)

e employee’s job duties must Th primarily involve executive, administrative, or professional duties as defined by the regulations.

(Duties Test)

These regulations were last updated in 2004, when the DOL set the weekly salary level at $455 ($23,660 annually) and made other changes to the regulations, including collapsing the short- and longduties tests into a single standardduties test and introducing a new exemption for highly compensated employees.

The DOL rule changes allow up to 10 percent (or $91.30 per week) of earnings used to satisfy the new threshold to come from nondiscretionary bonuses, incentive pay, or commissions, if such payments are paid at least quarterly.

Automatic Adjustments The new rule allows the DOL to change the salary threshold amount every three years, beginning January 1, 2020. The 40th percentile weekly earnings of full-time salaried workers in the lowest-wage Census region will be used to set the salary threshold in the future.

Highly Compensated Employees The Highly Compensated Employee (HCE) threshold has been raised from $100,000 to $134,004.

Employees earning at least this amount can generally be considered exempt without regard to the duties test. The DOL will use the 90th percentile of earnings of full-time salaried workers nationally as the threshold for HCE adjustments in the future.

Duties and Salary Basis Tests The DOL has not made any changes to the existing Duties and Salary Basis Tests.

Why Change the Rule?

On March 13, 2014, the DOL received a Presidential memorandum urging it to “update, modernize, and simplify” the current Fair Labor Standards Act rule. The Salary Level Test is supposed to help identify salaried workers who are entitled to overtime. The DOL believes the former salary threshold was outdated.

Who Will Be Affected?

Some examples of roles that are likely to be affected include: ❖ Food service managers/supervisors. ❖ Retail sales managers/supervisors. ❖ Nonprofit managers/supervisors. ❖ Customer service representatives. ❖ Legal support workers.

❖ Office and administrative support workers. ❖ Social workers. ❖ Counselors. ❖ Higher education employees.

How Lockton Can Help ❖ The Lockton Compensation Practice can provide an analysis of employees who may be impacted by the FLSA rule changes and make recommendations based on the facts of each employer’s situation. ❖ The Compensation Practice can perform financial modeling of multiple scenarios to help organizations minimize the financial burden of implementing the proposed changes. Examples include:

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› Calculate a new base pay rate for employees that will keep total annual pay constant or near constant even with new overtime hours/ premium. › Ensure new base pay rate complies with national and local wage regulations. › Calculate additional headcount needed to avoid paying overtime, including the cost of using temporary workers for overtime at a lower rate. › Conduct a comparison of adjusting to the new threshold versus projected overtime expenses. ❖ Most organizations will use a combination of some or all of these methods, depending on which mix of solutions best suits their financial and cultural needs. Oftentimes, different approaches will be needed for different roles. ❖ If employers need assistance properly classifying employees, the Lockton Compensation Practice can also provide FLSA evaluations and exempt/nonexempt status recommendations. This step may also include desk or job audits for updating job descriptions. ❖ Lockton can also assist with developing communication materials and training sessions for managers.

Communicating the Change Employers should begin communicating the change well before the deadline to comply with the rule becomes effective on December 1, 2016. Employees who will be affected by the change in their exempt status may feel disengaged or demotivated. Employers should be talking with those employees who will be affected as soon as the decisions on how to handle the changes have been made. Lockton’s advice is to eliminate the element of surprise and share with employees the details of the FLSA regulations and why it is happening. This will help the employee understand that it is not a reflection of performance.

Options for Communicating the Change ❖ FAQs ❖ Town hall meetings ❖ Manager meetings ❖ One-page overview

❖ Social media/Intranet ❖ Create an FLSA task force or committee to champion and lead the communication effort

Communication Considerations Salaried Versus Hourly: The new rule does not require affected employees to become hourly workers. They can remain salaried; however, work hours must still be tracked, and the employee is due overtime pay for any hours worked over 40 per week. If the salaried basis is important to an employee, then it is probably important to use that method of compensation.

Manager Training: Managers will have to clear up confusion about the overtime (OT) hours that reclassified employees can work. One question formerly salaried workers will have is whether they can get all their work done in a 40-hour workweek. Managers should conduct an audit of the job to determine if the job can be completed in a 40-hour workweek and to determine when, and if, OT is necessary. Additionally, Lockton recommends creating FAQs and guidelines for having difficult conversations with employees.

Relay Flexibility: Often, employees feel that nonexempt means working 8 a.m. to 5 p.m. every day and that they cannot work a minute past 5 p.m. This myth needs to be clarified. Flexibility can still occur.

If an employee needs to stay late for a specific task or meeting, then he or she can adjust his or her time on a different day during that week to meet a 40-hour workweek (except in California).

Company Property, Travel, and Working from Home: Decisions around salaried workers who take company phones and laptops home need to be addressed. The organization should determine whether the policy is to leave these items at work if employees are reclassified, or take the property from employees entirely to prevent them from working after hours. In many cases, working from home is an uncontrollable activity for the employer, and tracking the time worked at home as OT could prove problematic.

One option is for managers to work with employees to document job descriptions, including what types of work are authorized outside of normal working hours, how much time is authorized, and the necessity of recording all time worked.

Managers will also have to consider whether to allow reclassified employees to travel on company business and how to compensate workers for travel time.

Other considerations for the organization include responding to emails or phone calls from customers or staff outside of normal working hours. There may be a need to shift response time and priorities that could have an impact on productivity. Some of those responsibilities may need to be shifted to exempt employees, and corresponding job descriptions should be updated to reflect those changes.

For more information, please contact your Lockton Account Team or the Lockton Compensation Practice.

Brad Owens

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

www.HRProfessionalsMagazine.com

15

ppppppppppppppp ppppppppppppppp ppppppppppppppp Uber:

Everything Old Is New Again.

Or Is It?

By HOWARD B. JACKSON

In April of this year Uber settled two large class action lawsuits, one in California and one in Massachusetts.

Uber is a high-profile company on the leading edge of the new “shared economy;” by providing an app that would-be passengers use to find rides with drivers who own their own vehicles, Uber is not only transforming the landscape of paid transportation, but also challenging long-standing legal precedents in employment law regarding the status of its drivers. Specifically, the primary question in both of these lawsuits was whether Uber drivers were employees or independent contractors.

Per the settlement terms, the plaintiff classes will receive at least $84 million, and can receive up to an additional $16 million if Uber goes public and certain valuation measures are met. Interestingly, the settlement included a provision that the drivers in these two states would remain independent contractors, not employees. That provision did not buy Uber much peace, however, as a similar class action lawsuit was filed in Illinois on May 1, 2016.

In that case, the Complaint alleges that the drivers are employees, and says Uber owes the plaintiffs for unpaid overtime, pay for time not worked, reimbursement for expenses, and for the loss of gratuities which the lead plaintiff says Uber “stole from her.”

Déjà vu All Over Again?

If the subject of a large company fighting multiple class action suits over driver classification sounds familiar, perhaps it should. During much of the last decade Federal Express (“FedEx”) fought many class action lawsuits over their treatment of drivers as independent contractors.

FedEx operated for years under a business model that classified its drivers as independent contractors. The drivers used their own equipment, as they were required to purchase the truck if they wished to drive for FedEx. Drivers also paid for fuel and other expenses. Use of one’s own equipment has long been one of the hallmarks of an independent contractor.

On the other hand, FedEx required adherence to a great many standards. The drivers wore FedEx uniforms. They handled packages and tracking per FedEx requirements and systems.

The trucks had to meet FedEx requirements, including bearing the company logo.

Eventually, FedEx changed its business model and in 2011 hired the FedEx Ground drivers as employees. That did not end the pending lawsuits or their costs. For example, in June of 2015 FedEx settled a decade long class action case in California by agreeing to create a $228 million fund for payment of the misclassified drivers.

Now, Uber is the new favorite target for driver misclassification lawsuits.

How Do Uber Drivers Compare to FedEx Drivers?

Both employers required the drivers to own their vehicle. Of course, the Uber driver’s vehicle is typically a passenger vehicle and does not bear a company logo.

Uber must approve the vehicle, and drivers are required to meet safety standards. FedEx also approved vehicles and had safety standards.

Uber drivers are not required to wear uniforms. They do not track packages via a company system, but do of course learn of driving opportunities and track and report rides via Uber’s software.

Uber has recently published a guideline for its drivers regarding factors that can lead to “deactivation,” a term that refers to Uber removing someone from its list of drivers. According to the guidelines, poor quality can lead to deactivation. Quality is measured in various ways, 16

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including the “Star Rating” which is based on surveys from drivers and riders, cancellation rate (the percentage of times the driver accepts an assignment and then cancels), and acceptance rate (the percentage of driving opportunities that the driver accepts).

Uber will also deactivate a driver for fraud, safety violations, violation of drug and alcohol policy, legal compliance failures, violating the ban on firearms, failure to provide accurate personal information, unacceptable activities (such as accepting illegal hails or giving rides anonymously), or engaging in discrimination by refusing to serve or mistreating riders on the basis of race, sex, religion, etc. (Is it just me or is this list beginning to sound rather like an employee handbook policy?)

Will the Old Independent Contractor Analysis be Made New Again?

The new economy has created new models for companies and the individuals who provide services for them. Uber is a prime example.

Under the current legal analysis for independent contractors (including a list of factors used by the IRS in determining independent contractor status for tax purposes), it appears likely that the drivers would be found to be employees. They must adhere to Uber standards during the performance of their duties. If they do not do so, including accepting a high enough percentage of driving opportunities, Uber will deactivate them.

One may argue that while the above is true, the drivers supply their own vehicles, are free to accept or reject assignments, and can certainly pursue other opportunities, business and personal, while working via Uber. All of these things are true, and make the analysis a closer case than many.

With all due respect to the IRS factors and other “factor”-based analysis of the issue, there has always been an extent to which the determination of independent contractor status has been something of a “know it when I see it” exercise. The primary consideration in the “know it when I see it” judgment is whether it appears that the person in question is genuinely in business for himself or herself, or is dependent on the organization in question for his or her work. While it may be a closer question with Uber for a variety of reasons, the bottom line reality is that, absent Uber, the drivers are not in the driving business at all.

Assuming that the “old” and existing independent contractor analysis leads to classification of the drivers as employees, that raises the question: Will Congress or the courts change the law in some way that accommodates this and similar work models?

The answer will impact a great many people. Uber says that over 450,000 drivers use its app each month in the U.S. alone. (April 21, 2016 blog by Uber CEO and co-founder Travis Kalanick.) Uber is just one company.

It has competition in the transportation business that uses a very similar driver model. And there are many other employers and individuals who are engaging in, and desire to engage in, such non-traditional forms of work.

If there is a change in the law, who would accomplish it? What would it look like? The courts are unlikely to create wholesale changes in the independent contractor analysis. That leaves legislation as the more likely route.

Given the rise of new business models such as Uber, Congress may see a need to act. But in which direction? Congress could create new laws that make it harder to treat someone as an independent contractor. Or, Congress could enact rules creating new standards that are easier to define and understand and which, if met, would clearly permit independent contractor classification.

It is too early to tell whether Uber and other employers with “shared economy” business models will become prevalent or powerful enough such that new rules are forged to assist them, or at least lend clarification to the analysis. Meanwhile, it seems that lawsuits on this topic will continue unabated.

“Uberification” Makes Strange Bedfellows: Unions and Uber

an Independent Drivers Guild in New York City that was created via the International Association of Machinists. Uber’s cooperation in these efforts is apparently driven by a desire to have a more formalized means to communicate with its many drivers, and to address and resolve their concerns.

This model will not work if the drivers are employees. Under the National Labor Relations Act an employer may not fund a union or its activities.

Where that takes place, the organization is considered an unlawful, employer-dominated union.

For so long as the drivers are considered independent contractors, however, the new arrangements between Uber and the unions may operate lawfully.

This is because the National Labor Relations Act only covers employees, and does not apply to independent contractors. So long as the drivers are independent contractors, then Uber can flatly refuse to deal with any union that wishes to represent them. On the other hand, and for the same reason, Uber is also free to enter contractually defined relationships with unions if it so desires, and can even contribute funds to help cover the union’s activities in communicating with and providing services to Uber drivers.

Will the Law Keep Up? As a societal institution, the law often lags behind society and technology.

The courts rule based on precedent, and legislatures must debate change in a politically charged environment. Meanwhile, businesses such as Uber and others find creative new ways to provide services and attract and serve customers. It will be interesting to see whether, and if so when, the law adjusts to new working arrangements such as Uber’s in the “shared economy” model.

An unusual aspect of Uber’s resolution of the California and Massachusetts lawsuits was its agreement to help create and fund a drivers association in both states. Since that time, in May of 2016, Uber recognized

Howard B. Jackson, Attorney Member, Knoxville office Wimberly Lawson Wright Daves & Jones, PLLC hjackson@wimberlylawson.com www.wimberlylawson.com

Is your business ready for the DOL’s December 1 wage and hour changes? Join FordHarrison for a complimentary half-day conference Thursday, August 4, to explore the DOL’s new overtime exemptions rule in detail and equip your company with best practices for wage and hour compliance.

For more information and to register, visit www.fordharrison.com/MemphisConference www.HRProfessionalsMagazine.com

17

The Defend Trade Secrets Act:

A New Weapon in the Fight Against Trade Secret Misappropriation and How to Use It

On

By KRISTY L. GUNN

May 11, 2016, President Barack Obama signed into law the Defend Trade Secrets Act of 2016 (“DTSA”), which amends the Economic Espionage Act of 1996 and is effective immediately. The passage of the DTSA ushers in a new era in trade secret protection. The three key features of the DTSA are: (1) the creation of a federal private right of action for misappropriation of trade secrets that are “related to a product or service used in, or intended for use, in interstate commerce”; (2) a provision permitting ex parte civil seizure of property necessary to prevent the propagation or dissemination of trade secrets; and (3) a requirement that employers provide notice to employees of specific immunities available to them under the DTSA in order to recover attorneys’ fees and exemplary damages.

What Does a Federal Private Right of Action Mean for Employers?

Since 1996 the Economic Espionage Act has criminalized trade secret misappropriation under federal law. That Act, however, conferred exclusive power to initiate civil and criminal proceedings on the U.S. Department of Justice. Thus, there was no federal private right of action for trade secret misappropriation. Fortunately for American businesses, forty-eight states ultimately adopted the Uniform Trade Secrets Act (or some adaptation thereof ), which does permit private lawsuits for the misappropriation of trade secrets. The lack of a federal right of action, however, meant that many employers had to litigate such claims in state court and comply with disparate legal nuances of both law and procedure applicable to each state. In creating the first ever federal private right of action for trade secret misappropriation, the DTSA provides employers with a greater degree of uniformity, both in the law and in court procedure. The DTSA, however, does not preempt state law (except as it relates to employee immunity explained below); therefore, a trade secret owner may still file suit under state law, as well as the DTSA. What Is Protected and What Is Prohibited?

Under the DTSA, the term “trade secret” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and regardless of whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if: (a) the owner has taken reasonable measures to keep such information secret; and (b) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by another person who can obtain economic value from the disclosure or use of the information.

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Under the DTSA, “misappropriation” means (a) the acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (b) the disclosure or use of a trade secret without consent by a person who (i) used improper means to acquire the trade secret; (ii) or knew or had reason to know that the knowledge of the trade secret was (I) derived by improper means, (II) acquired under circumstances giving rise to a duty to maintain secrecy or limit use, or (III) derived from a person who owed a duty to maintain secrecy; or (iii) the person knew or had reason to know the trade secret was a trade secret and had knowledge that the trade secret was acquired by accident or mistake. Under the DTSA, “improper means” include theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, and espionage through electronic or other means. But, the term does not include reverse engineering, independent derivation, or any other lawful means of acquisition.

What Are the Remedies?

The DTSA provides for injunctive relief but specifically prohibits injunctions that (1) prevent a person from entering into an employment relationship or place conditions on such employment without evidence of threatened misappropriation (and not merely on the information the person knows), and (2) conflict with state law prohibiting restraints on the practice of a lawful profession, trade, or business. The DTSA also provides for actual damages, unjust enrichment, reasonable royalty, exemplary damages (double damages) for willful and malicious misappropriation, and attorneys’ fees.

Actions under the DTSA must be brought within three years of discovering the misappropriation or “by the exercise of reasonable diligence should have been discovered.”

Perhaps most significantly, the DTSA also allows for the court’s ex parte civil seizure of property necessary to prevent the propagation or dissemination of trade secrets. Such seizure requires “extraordinary circumstances,” which are not defined in the statute. An applicant seeking ex parte seizure of property must also, among other things, (1) meet the standard necessary for an injunction under federal law, (2) demonstrate that the property would become inaccessible if not seized, and (3) not publicize the requested seizure. In the event seizure is ordered it will be effectuated by a Federal law enforcement officer, and the court will be the custodian of the seized property. The statute contains numerous safeguards to prevent abuse of the seizure authority, including remedies for the wrongful or excessive seizure of property. Thus, a party seeking seizure of property must articulate the items to be seized with specificity and seek no more than the seizure of misappropriated trade secrets.

In sum, the ex parte civil seizure of property provision of the DTSA is a powerful tool in the trade secret protection arsenal and may well revolutionize the nature of private trade secret litigation.

When Is an Employee Immune from the DTSA? Perhaps of most immediate interest to employers are the DTSA’s immunity and notice provisions. Under Section 7 of the Act, “employees,” including contractors and consultants, who disclose a trade secret to the government or in a court filing are generally immune from civil and criminal liability under both the Act and state law.

Specifically, employees may disclose trade secrets, confidentially, to a government official or an attorney if done “solely for the purpose of reporting or investigating a suspected violation of law,” or “in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” Employees who file retaliation lawsuits for reporting a suspected violation of law may also disclose the trade secret to their attorney and use the information in the court proceeding, as long as it is filed under seal and the employee does not otherwise disclose the trade secret “except pursuant to court order.”

What Notice Must Be Provided to Employees?

Also pursuant to Section 7 of the DTSA, employers are required to provide employees with notice of the immunities described. Notice must be provided “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” This notice requirement is limited to contracts and agreements that are entered into or updated after the enactment of the DTSA (May 11, 2016). “Notice” in such contracts or agreements may consist of a “cross-reference to a policy document provided to the employee that sets forth the employer’s reporting policy for a suspected violation of law.” Employers who fail to comply with the notice requirement waive their right to procure exemplary damages and attorneys’ fees in a trade secret misappropriation action under the Act, but do not forgo their right to pursue other remedies authorized under the Act. Furthermore, the notice requirements do not affect acts that are “otherwise prohibited by law, such as the unlawful access of material by unauthorized means,” e.g., the Computer Fraud and Abuse Act. What Immediate Actions Should Employers Take?

Employers should include the required notice in prospective employment agreements governing trade secrets or other confidential information.

Employers should consider combining this language with other whistleblower notice language. In the alternative, employers should craft a “policy document” governing the use of trade secrets or other confidential information and reference such policy document in applicable employment agreements. Employers who elect to merely reference the policy document in their employment agreements should require employees to acknowledge receipt of such policy in writing.

Employee and technological mobility have increased the likelihood that employees will take valuable trade secrets when exiting employment and bring trade secrets when entering new employment. In light of this fact, employers should take this opportunity to (1) review, identify, and assess the value of the company’s trade secrets (and the potential impact of their loss); (2) examine the ways in which those secrets may be exposed or threatened (confidentiality is paramount to maintaining protection); and (3) take measures to secure trade secrets through protective onboarding and offboarding strategies and workplace policies and procedures, such as updating offer letters and nondisclosure, confidentiality, invention, assignment, and return of property agreements and following up with former employees after they have left employment (e.g., with obligations reminders and/or cease and desist demands).

Kristy L. Gunn, Attorney Ogletree Deakins Kristy.gunn@ogletreedeakins.com www.oglegreedeakins.com www.HRProfessionalsMagazine.com

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Twelve Tips to Minimize Workplace Conflicts

R

By SONJA WEATHERS

esolving conflicts that arise in the workplace is one of the biggest challenges managers and employees face. According to recent research, managers spend about 35% of their time dealing either directly or indirectly with workplace conflicts.

There are typically two responses to conflict: flight (avoidance) or fight. In either case, we often feel uncomfortable or dissatisfied with the results because no resolution is reached.

2

: Training employees to treat diversity in others respectfully.

Conduct regular team building to foster a united front in the workplace. Personality tests help define the differences in each employee, and subsequent training helps each individual better understand how others think and feel differently. And, as always, managers should lead by example in treating each team member as a valued, respected member of the company.

3

4

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: Make clear certain behavior won’t be tolerated.

It’s true that companies benefit from a variety of personalities, modes of working styles, and diverse problem solving. However, no one every reaps rewards from bullies. It’s essential that management take a hard line on bullying, violence, and other anti-social behaviors, and employees should understand the consequences of those actions can include termination.

5

: Keep eyes peeled for warning signs.

Workplace conflict can result in increased employee absences, reduced productivity, and a noticeable increase in stress levels. Intervene if you see employees exhibiting these behaviors before it escalates into a matter even more detrimental to employee productivity and morale.

Here are twelve tips on how you can minimize the effect conflicts has on team morale and the atmosphere of the workplace.

First, let’s attempt to minimize the chances of workplace conflict by…

1

: Encouraging all employees to work toward the big picture.

Every person working at a business has similar goals. Significant ones are to keep the doors open and continue getting paid! Instead of focusing only on “this division” or “that department” HR professionals should remind each team member that they all share priorities and should work toward big picture success.

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: Uncover the true issue.

Dig into the conflict with each party until you uncover the true issue. While they may say the conflict is over a current project, the underlying problem could be anything from disagreeing with each other’s lifestyle to feeling underappreciated by management.

Understanding the crux of the problem is the only way to figure out a solution.

9

: Define expectations in advance.

From the first day on the job, employees should begin learning the type of behavior that is expected of them. Management must consistently train their teams to work together and resolve issues in a reasonable, adult manner.

In a perfect world, the above steps would purge all workplace conflicts, however, we know that certain personalities and egos are bound to clash at some point.

Management must…

By handling situations on the front end, we can turn a negative, unproductive situation into an opportunity for greater teamwork and enhanced performance.

8

: Stick to the present issue.

In trying to resolve conflict, it is tempting to lose your temper or bring up issues from the past. In order to minimize workplace conflicts, it is important to address specific behaviors and situations if change is to take place.

: Manage your reactions.

Overreacting is a natural human reaction, but make every attempt to restrain yourself. In the workplace, it is important to manage your reactions. It is best to listen, evaluate and plan a response. Keep impatience and frustration out of your voice, and avoid non-verbal cues (huffing, eye rolling, eyebrow raising, slapping the desk) of irritation.

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:W ork to resolution calmly and methodically.

Once both sides have their say, summarize the conversation to make sure that you have an accurate understanding of where both employees stand, and so they know that you heard them. This creates an informal structure of respect for the rest of the conversation, and reduces the possibility of misinformation and misunderstandings. Then ask each party for their thoughts on resolution. Neither party should be criticized for the solutions offered.

Work from this point to customize a solution that is acceptable to both parties.

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6

:A sk for buy in from all parties involved.

Simply declaring they must get along will get you nowhere, fast. Lay out the solution and get verbal buy in from every person. This makes them accountable for their role in helping better the situation.

Be upfront and direct when addressing conflicts. Handle issues face-to-face if at all possible. Do NOT verbally spar via email, as this usually only inflames the situation, as it's difficult to judge the tone of an email.

Sooner or later, everyone is faced with a workplace conflict. Minimize the drain on productivity, good flow of ideas, and positive morale by taking the initiative and implementing these tips into your HR processes.

Everyone’s stress level, and the company’s bottom line, will thank you for it!

: Handle it as soon as possible.

Make a point to handle issues as they occur, and not wait until they get out of hand. Addressing potential conflicts may be uncomfortable, however, this practice helps avoid serious conflicts down the road.

7

: Avoid making assumptions.

It’s the manager’s role to deal with conflicts in an impartial manner. Don’t assume that “Betty is just sensitive” or “Larry is stressed out over buying a house.” Sweeping conflict under the rug this way only serves to let it fester and possibly boil over.

Sonya Weathers National Account Executive sonya@datafacts.com www.datafacts.inc

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23

E111111111111111111111F E111111111111111111111F Is Your Company’s Health Plan Creating Personal Legal Exposure to Your CFO and HR Executives?

By CHRIS DAVIS

Imagine you own a family pizza shop and it’s time to order supplies for the busy summer season. On April 1, you buy the necessary premium ingredients for that month’s expected work. Cheese costs $2 per pound, pepperoni is at $5 per pound and dough at $5 per pound. When you work out all of the math, your ingredient cost averages out to about $3 per pizza for the month of April, using only the highest quality ingredients.

But you hit a snag. You under-ordered the amounts necessary for each ingredient, so you go back to your distributor on April 17. This time, the costs are $1.50 per pound for the premium cheese, $18 dollars per pound for standard pepperoni – because that’s all the distributor had available – and $7 per pound for the lowest quality dough. It’s the only dough the distributor would offer now, and you’re contractually obligated to purchase it. This raises your ingredient cost to $6.63 per pizza, made from lower quality ingredients.

Why the variance? Why did the premium cheese go down by 50 cents per pound, while you ended up paying 260% higher per pound of pepperoni when it was of lower quality than your original order? And why did you sign a contract that forced you to buy the lowest quality dough the distributor had to offer, even at a 40% increase? Why would your distributor even sell you lower quality ingredients, let alone at a higher price? I’m sure your customers and your wallet would notice the difference in this obligated change, right?

What if I told you there are similarities between your health plan and this pizza shop example? With steep discrepancies – as much as a 2187% variance in the cost of an MRI within a network or 5700% variance in the cost of a statin being paid when your employees fill a prescription – the question arises whether plan fiduciaries are equipped to successfully fulfill obligations. And ERISA imposes fiduciary responsibilities that are among the highest imposed by any law.

In performing plan-related duties, ERISA requires a plan fiduciary act: ˆ Solely in the interest of the participants and their beneficiaries ˆ For the exclusive purpose of providing benefits to workers participating in the plan and their beneficiaries, and defraying reasonable expenses of the plan ˆ With the care, skill, prudence and diligence of a prudent person familiar with such matters ˆ In accordance with the plan’s governing documents (to the extent consistent with ERISA) There are also fiduciary duties in connection with participant disclosures (for example, to not misinform or fail to inform when silence may be harmful). Fiduciaries have personal liability under ERISA and failure to uphold fiduciary duties can result in, among other things, civil penalties, lawsuits and damage to an employer’s reputation.

As you can see, there’s a lot at stake, which underscores why it’s so important to understand and satisfy fiduciary duties.

Without access to claims data and information regarding the quality and outcomes of medical providers, as well as the ability to audit provider bills for accuracy and contractual specificity, how can a fiduciary satisfy his/her obligations under ERISA? Several recent cases, such as Redoak Hospital, LLC v. Gap Inc., sound the trumpet that 24

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a large contingency of health plan fiduciaries may be unaware of the true costs that are nestled away in their health plan contract language that may not have been properly reviewed. Could this prompt the DOL and the IRS to train investigators to seek out healthcare waste in a similar manner to how they seek out waste within employer 401(k) plans? Only time will tell. But one of the most startling differences may be that health plans can have eight to 12 times the financial waste, compared to 401(k) plans.

That would certainly seem to make them ripe for investigation and employee litigation.

For most benefits managers, HR directors and CFOs, the thought of creating value in their health benefit plans is more daunting than the status quo of supervision via a large administrator with a broad network and pre-defined employer contracts.

But with the same amount of effort and the appropriate access to information, you can slash healthcare costs and increase earnings, while actually improving health benefits for employees and their families. Aside from satisfying fiduciary obligations imposed under ERISA, there are very few strategies that can create viability for an organization than actively managing health care expenses via a sound and robust healthcare strategy.

Some progressive-minded employers are beating back their healthcare costs by saving 20-55% less per capita on health benefits versus traditional approaches. These organizations are converting overspending on healthcare into value for organizational stakeholders, including the reinvestment of unused capitol into other business needs. Most are securing these savings by adopting numerous benefit features, including: ˆ Creating rigid and well-defined PBM contracts in the company’s self-interest ˆ Building a methodology of identifying and routing highdollar claims correctly ˆ Applying evidence-based care to primary care and routine procedures ˆ Creating tighter contracts with health plan administrators regarding the payment and quality of providers within those networks ˆ Significantly tightening health plan documents and contractual language ˆ Having third-parties assume fiduciary responsibilities for certain elements of the benefit plan to ensure neutrality and efficiency By focusing on fiduciary responsibilities, organizations can quickly turn risks into rewards for themselves and their members, while ensuring compliance. In this sense, employers are getting premium slices of the healthcare pizza at the lowest costs on the market, while ensuring their shops keep the ovens baking for a long time to come.

Chris Davis, MPH, ACSM Director of Health Mgmt & Claims Informatics Regions Insurance Inc. james.c.davis@regions.com www.regionsinsurance.com

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Tom Hayes Employee Benefits Practice Leader tom.hayes@regions.com 479-684-5259 www.regionsinsurance.com

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Find Regions Insurance offices in Alabama, Arkansas, Florida, Georgia, Indiana, Louisiana, Mississippi, South Carolina, Tennessee and Texas ©2016 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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University of Memphis The Department of Management in the Fogelman College of Business and Economics at the University of Memphis offers AACSB-accredited training in human resource (HR) management and organizational behavior. The following faculty have an expertise in these areas: Carol Danehower, Alex Rubenstein, Chuck Pierce, Bob Renn, and Bob Taylor. They offer undergraduate courses on HR topics such as introduction to human resource management, compensation & performance appraisal, employee relations, staffing organizations, and employee training & development.

The University of Memphis offers MBA and executive MBA courses on topics such as managing human resources and strategic human capital management. They also offer a doctoral research seminar on human resource management. In addition, they have a student chapter of the Society for Human Resource Management (SHRM).

Finally, they have an undergraduate concentration in HR management. For more information, please contact Dr. Chuck Pierce, Chair of the Dept of Management (capierce@memphis. edu; http://www.memphis.edu/management).

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Thanks, Claire!

Rhodes salutes Claire Shapiro, Chief Human Resources Officer, for helping make the college such a great place to work. Your wit and wisdom are greatly appreciated.

2015 Rhodes named a Healthier Tennessee Workplace by the Governor’s Foundation for Health and Wellness 2014 & 2015 Rhodes recognized for its Culture of Health by the Memphis Business Group on Health & Healthy Shelby 2014 & 2015 Rhodes received the American Heart Association Fit Friendly Worksite, GOLD Achievement 2009 Rhodes recognized as a Great College to Work for by the Chronicle of Higher Education

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Considering quality, price, and convenience, the Weekend MBA may be the best educational value in Arkansas. The program cost, $25,000, is all inclusive meaning students do not have to worry about the cost of books, extra fees, or even lunch on class days; it’s all included. Plus, students pay as they go one semester at a time.

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nation cases involving transgender discrimination. Relying on the reasoning in Price Waterhouse, the EEOC issued a decision— Macy v. Holder—categorically holding that intentional discrimination against a transgender individual, because that person is transgender, is, by definition, discrimination based on sex, which violates Title VII. Following that decision, the EEOC filed three separate lawsuits on behalf of transgender workers. The crux of the EEOC’s theory is that Title VII protects transgender workers based on “sex.”

Transgender Bathroom Access In The Workplace

By ABTIN MEHDIZADEGAN

T

here is no shortage of commentary on the “bathroom” issue—the ability of an individual to use a bathroom consistent with his or her gender identity—in the wake of a national controversy that came to a tipping point when the Governor of North Carolina signed a law (H.B. 2) that requires individuals to use bathrooms that are consistent with their biological sex. In response, because of H.B. 2’s impact on the transgender community, the U.S. Department of Justice filed a lawsuit against North Carolina to prevent the law’s enforcement. This election-year controversy has renewed a national debate on LGBTQ issues in the workplace, and businesses continue to field questions from their employees regarding their rights to bathroom access. This article seeks to address the legal implications of discrimination on the basis of transgender status and common objections in the workplace to transgender bathroom use.

I. TRANSGENDER STATUS IS LIKELY COVERED UNDER TITLE VII OF THE CIVIL RIGHTS ACT. Although no federal statute explicitly prohibits employment discrimination based on gender identity or expression, as used in Title VII, the term “sex” encompasses both sex—that is, the biological differences between men and women—and gender.

As such, the terms “gender” and “sex” are often used interchangeably to describe the discrimination prohibited by Title VII. For instance, in Price Waterhouse v. Hopkins, a successful female associate was denied partnership because she did not present herself in a manner that some of the partners thought women should behave. Ms. Hopkins was informed that, to improve her chances for partnership in the next year, she should “walk more femininely, talk more femininely, dress more femininely, wear make-up, have her hair styled, and wear jewelry.” Upon review, the Supreme Court of the United States concluded that discrimination for failing to conform with gender-based expectations violates Title VII because, “[i]n the specific context of sex stereotyping, an employer who acts on the basis of a belief that a woman cannot be aggressive, or that she must not be, has acted on the basis of gender.”

Since Price Waterhouse, courts have widely recognized “sex stereotyping” as a valid method of establishing discrimination “on the basis of sex” in Title VII discrimi32

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Transgender discrimination cases, of course, will actively be litigated across the country, but courts have generally interpreted Title VII’s protections broadly to encompass transgender discrimination. In Arkansas, for instance, the District Court for the Eastern District of Arkansas recently denied an employer’s motion for summary judgment on a claim that the employer discriminated against a transgender employee. See Dawson v.

H&H Elec., Inc., No. 4:14CV00583 SWW, 2015 WL 5437101 (E.D. Ark. Sept. 15, 2015). The employer argued that transgender discrimination was not actionable under Title VII. The Court disagreed, and held that Title VII law is well-settled and operates to prohibit employers from taking adverse action because an employee's behavior or appearance fails to conform to gender stereotypes.

The expansion of Title VII’s coverage of transgender status is part of a nationwide trend and aggressive regulatory agenda to protect members of the LGBTQ community from discrimination. For instance, government contractors, pursuant to Executive Order 13672, are expressly prohibited from discriminating against employees on the basis of gender identity and sexual orientation. Similarly, the Occupational Safety and Health Administration, pursuant to Sanitation Standard 1910.141, has released guidance for private employers on the issue of bathroom access for transgender employees. Specifically, OSHA takes the position that “all employees should be permitted to use the facilities that correspond with their gender identity.”

In the wake of North Carolina’s passage of H.B. 2, the EEOC released guidance stating that employers will still be liable for gender discrimination claims even if a conflicting state law suggests otherwise. Therefore, even in the absence of an express federal statute regarding employment protection on the basis of gender identity, in light of the expansive definition of the term “sex,” it is likely that Title VII would be construed as prohibiting discrimination on the basis of transgender status.

II. RELIGIOUS OBJECTIONS TO TRANSGENDER BATHROOM EQUALITY. Bathroom use by transgender persons may raise serious concerns from coworkers who share the transgender employee’s gender identity. For instance, it is conceivable that female coworkers may be uncomfortable with the concept of sharing a sex-specific multi-stall restroom with an individual who, though identifying outwardly as a female, previously presented as a male, consistent with biological sex. Several concerns may be couched in terms of religious objection, like the case of Cruzan v. Special School District No. 1, 294 F.3d 981 (8th Cir. 2002).

In Cruzan, David Nielson—a teacher of nearly thirty years— informed school officials that he identified as a female and intended to transition outwardly in appearance from male to female, and that he would thereafter be known as Debra Davis.

To plan for the transition, the school district collaborated with Davis, legal counsel, the parent-teacher association, students’ parents, and psychologists. Carla Cruzan, another faculty member with deeply held religious beliefs, asked whether Davis

would be allowed to use the women's restrooms at the school. Administration officials informed her that other arrangements would be made. At some point, legal counsel informed the school that Davis had the right to use the women’s restroom, and therefore, after Davis's transition, the school district permitted her to use the women's faculty restroom.

A few months later, Cruzan entered the women's faculty restroom and saw Davis exiting a privacy stall. Cruzan immediately left the restroom, found the principal in the hallway among students, and complained about encountering Davis in the restroom. The principal asked Cruzan to either wait in his office or to make an appointment to discuss the matter. Instead, Cruzan filed a complaint with the Minnesota Department of Human Rights, which dismissed Cruzan's charge of discrimination for lack of probable cause to believe an unfair discriminatory practice had occurred.

The Department stated the Minnesota Human Rights Act (MHRA) neither requires nor prohibits restroom designation according to self-image of gender or according to biological sex. Cruzan then filed a complaint in federal district court alleging religious discrimination and hostile work environment sex discrimination under Title VII and the MHRA. With respect to her religious discrimination claims, the district court held in favor of the school because “[m]ere inconvenience without any decrease in title, salary, or benefits is insufficient to show an adverse employment action.” On Cruzan’s sexual harassment claim based on hostile work environment, the district court similarly determined that Cruzan’s alleged harassment failed to meet the standard of being “so severe or pervasive that it alters the conditions of employment and creates an abusive working environment” because the school was not “permeated with discriminatory intimidation, ridicule, and insult.” The Eighth Circuit affirmed the district court and held that Cruzan failed to show the school district's policy of allowing Davis to use the women's faculty restroom created a working environment that was “hostile.”

Accordingly, although issues of religious discrimination and hostile work environment require a case-by-case assessment, Cruzan stands for the general proposition that common complaints to transgender bathroom use by co-workers (gender discrimination and religious discrimination) will generally not be actionable. Striking a delicate balance between the recognized right to restroom access and religious expression against the needs of transgender employees presents potentially conflicting obligations for employers. Providing unisex bathrooms, or extra single-occupancy bathrooms—for the use of both transgender and gender-conforming employees—may provide a workable compromise.

Providing unisex bathrooms, or extra single-occupancy bathrooms—for the use of both transgender and genderconforming employees—may provide a workable compromise.

While the issue of accommodating transgender employees is a burgeoning area of law, contemporary advice generally involves three action items: (a) transition plans; (b) policy updates; (c) management training. First, when an employee provides information regarding an intent to transition, like the school district in Cruzan, employers are encouraged to consider engaging in an interactive process with the employee at issue to create a “transition plan.” A good starting point is to simply ask what workplace accommodations the employee needs during the transition process. Such information may include the name the employee wishes to use and the employee’s anticipated timetable for the transition process. The discussion may also include

the employee’s preference with respect to bathroom access, compliance with the dress code, and when and how the employee wishes for co-workers to become aware of his or her transition, which may coincide with switching names and use of pronouns. The transition plan should also designate one or more specific points of contact within Human Resources for fielding questions or concerns about aspects of the Plan.

Additionally, employers should review its anti-discrimination and antiharassment policies to prohibit such conduct on the basis of gender identity and transgender status. Once a policy is implemented, employers should consider education and training for supervisors and employees. Depending on the transition plan, meetings with other co-workers who regularly interact with the transitioning employee may be warranted to emphasize that all employees use the transitioning employee’s new name, if applicable, and use the appropriate pronouns for the employee’s expressed gender identity.

CONCLUSION Remedial statutes like Title VII are often given broad construction by the courts to effectuate their purposes. For Title VII, those purposes include protecting employees and promoting equality of treatment and employment opportunities. The writing is on the stall that Title VII’s broad definition of sex—gender—protects transgender employees from discrimination in the workplace: even in the bathroom. Unless and until Congress passes legislation that specifically addresses the reach of Title VII’s prohibition against sex discrimination, employers are well-advised to stay above the fray of the bathroom debate and work to accommodate all affected workers.

Abtin Mehdizadegan Associate Attorney Cross, Gunter, Witherspoon & Galchus, P.C. Abtin@cgwg.com www.cgwg.com

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33

Prohibiting Discrimination under the Affordable Care Act

By JENNIFER S. KIESEWETTER

On

May 18, 2016, the Department of Health and Human Services (HHS) published Section 1557 final regulations implementing the prohibition of discrimination under the Affordable Care Act (ACA) of 2010. More specifically, Section 1557 is

the nondiscrimination provision which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in a health program or activity that receives Federal financial assistance from HHS (such as hospitals that accept Medicare or doctors that accept Medicaid), in the Health Insurance Marketplaces and issuers that participate in the Marketplaces (including both Federally-facilitated and Stated-based Marketplaces), or in any health program administered by HHS.

The final regulations have been issued to educate consumers about their rights and to help covered entities understand their legal obligations. Covered entities may include hospitals, health clinics, health insurance insurers, state Medicaid agencies, community health centers, physician’s practices, and home health agencies.

Although the final regulations were just released, Section 1557 has been in effect since the 2010 enactment of the ACA and have been enforced by HHS’ Office for Civil Rights (OCR) since such time. The final regulations, which will become effective on July 18, 2016, extend the nondiscrimination protections to those enrolled in the Health Insurance Marketplaces, extend the application of such regulations to HHS’s own health programs, and offer guidance on the interpretation on several aspects of Section 1557, such as the broad interpretation related to sex discrimination.

Section 1557 builds on other Federal civil rights laws, such as Title VI of the Civil Rights Act of 1964 (Title VI), Title IX of the Education Amendments of 1972 (Title IX), Section 504 of the Rehabilitation Act of 1973 (Section 504), and the Age Discrimination Act of 1975 (Age Act).

Notably, Section 1557 is the first Federal civil rights law broadly prohibiting discrimination on the basis of sex in all federally funded health care programs.

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Key Provisions Under the final regulations, a covered entity cannot deny, cancel, limit, or refuse to issue or renew a health-related insurance policy or other healthrelated coverage; deny or limit coverage of a claim, or impose additional cost sharing or other limitations or restrictions; or employ marketing practices or benefit designs that discriminate on the basis of race, color, national origin, sex, age, or disability.

Sex Discrimination Section 1557 prohibits the denial of health care or health coverage based on an individual’s sex, including discrimination based on pregnancy, gender identity, and sex stereotyping (which typically includes discrimination based on sexual orientation).

With respect to sex discrimination, the final regulations require that women be treated equally with men in the health care they receive. Thus, for example, Section 1557 prohibits insurance companies from charging women higher premiums and other costsharing measures for their health insurance as opposed to men. Section 1557 further requires covered entities to provide for coverage of maternity services, birth control, and breastfeeding supports.

The final regulations also prohibit a covered entity from denying or limiting coverage, denying or limiting a claim, or imposing additional cost sharing or other limitations, on any health services that are ordinarily or exclusively available to individuals of one gender, based on the fact that an individual’s sex assigned at birth, gender identity, or recorded gender is different than the one to which the health care services are ordinarily or exclusively available. Further, under the final regulations, categorical coverage exclusions or limitations

for all health services related to gender transition are discriminatory. Also, a covered entity cannot deny or limit coverage, deny or limit a claim, or impose additional cost sharing or other limitations or restrictions, for any specific health services related to gender transition if such denial, limitation or restriction results in discrimination against a transgender individual.

Disability Discrimination

and then typically refer the matter to the Equal Employment Opportunity Commission (EEOC), if OCR lacks jurisdiction over the employer.

Additionally, the final regulations state that to the extent the provisions of the regulations require changes to health insurance or group health plan benefit design, such provisions have an applicability date of the first day of the first plan year (in the individual market, the policy year) beginning on or after January 1, 2017.

With respect to disability discrimination, the final regulations require that covered entities must make all programs and activities provided through electronic and information technology accessible, ensure the physical accessibility of newly constructed or altered facilities, and provide appropriate auxiliary aids and services for individuals with disabilities.

With the effective date quickly approaching, covered

Limited English Proficiency

dures, among other issues, for compliance with the nondis-

Additionally, covered entities must take reasonable steps to provide meaningful access to each individual who is limited English proficiency eligible to be served or likely to be encountered in their health programs and activities. Further, covered entities are encouraged to develop and implement a language access plan.

entities that may be impacted by Section 1557 and its final regulations need to analyze their plans, insurance documents, communication methods, policies and procecrimination final regulations. Further, and simply, covered entities must make sure that they have been in compliance since 2010. Any changes that may be required now are imposed by the final regulations. However, Section 1557 has been effective, and compliance has been required,

Religious Exemption The final regulations do not include a religious exemption in circumstances in which nondiscrimination obligations conflict with religious beliefs. However, the final regulations do not displace existing protections for religious freedom and conscience.

Procedural Requirements The final regulations require covered entities with fifteen (15) or more employees to have a grievance procedure and a compliance coordinator.

OCR has provided a model grievance procedure. Entities with fewer than fifteen (15) employees are not required to have a grievance procedure or a compliance coordinator.

since 2010.

Jennifer S. Kiesewetter, Esq. Kiesewetter Law Firm, PLLC Jkiesewetter@kiesewetterfirm.com www.kiesewetterfirm.com

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Additionally, the final regulations require covered entities to post notices of nondiscrimination and taglines that alert individuals with limited English proficiency to the availability or language assistance services. To help covered entities comply, the OCR has translated a sample notice and taglines into sixty-four (64) languages.

Business & Employment Immigration Practice

Enforcement The existing enforcement mechanisms under Title VI, Title IX, Section 504 and the Age Act apply to redress violations under ACA’s Section 1557.

These mechanisms include: requiring covered entities to keep records and submit compliance reports to OCR, conducting compliance reviews and complaint investigations, and providing technical assistance and guidance.

Since 2010, OCR has been receiving and investigating discrimination complaints pursuant to Section 1557.

Where noncompliance with Section 1557 cannot be corrected by informal means, available enforcement mechanisms include suspension of, termination of, or refusal to grant or continue Federal assistance; referral to the Department of Justice with a recommendation to bring proceedings to enforce any rights of the United States; and any other means authorized by law. An individual may also bring a civil action to challenge a Section 1557 violation.

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If an entity acts as a third-party administrator (TPA) for a health plan, OCR will investigate the TPA when the alleged discrimination occurs in the administration of the plan. If the alleged discrimination is in benefit design, OCR will process the complaint against the employer/plan sponsor, www.HRProfessionalsMagazine.com

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Is Silicon Valley Losing Its Soul?

By CLIFFORD STEPHAN

An abundance of young money. A hypercompetitive environment. Poor work-life balance.

Insular, bubble-like culture. Sky-high cost of living. Atrocious commute times.

That’s Silicon Valley, according to a recent article in Quartz (http://qz.com/586941/whatseating-silicon-valley/), and the description is spot-on.

It’s a tough place to live and work. Employees are stressed out—unsettled, uncommitted, always searching for the next big thing. Employers are stressed out, too, as they try to recruit and retain top talent while staying on top of day-to-day business demands.

Sound familiar?

It’s crazy here in the Bay Area, but you know what? It’s crazy in a lot of places. When I talk to colleagues from around the country—whether in Louisville or Nashville or Chicago, I hear about similar challenges. If you’re in a big city, you (and your employees) have probably experienced these headaches.

Is it possible to bring more peace and stability to our workplaces? And where do we start?

The Quartz article urges leaders to tackle big problems like the water crisis, traffic gridlock, and diversity issues.

That all sounds great, but I’m not sure it would do much to address the everyday toll on employees.

Here’s a more modest proposal: Put more heart, soul, and energy into strong people programs. Without that piece, stress, instability, and dissatisfaction are inevitable.

In my consulting work, I hear stories all the time about employee dissatisfaction. I touched on that issue recently in an article about Jennifer Lawrence and the Fair Pay Act https://www. linkedin.com/pulse/hr-alert-jennifer-lawrence-fair-pay-act-clifford-stephan?trk=prof-post. I thought I was just doing a tongue-in-cheek take on a new HR law in California, but I really hit a nerve with some readers.

One shared, “I found out that I’m getting paid $10,000 less than a male counterpart for doing the same job…I don’t know if I should bring it up. Will I be perceived as ‘bitchy’ and just complaining?” Several others shared similar stories with me.

For these people—and many others—their jobs make them question their worth, every day. When employees perceive that they aren’t being treated equitably, they feel devalued and disaffected. They may not stick around long, and if they do, their unhappiness may rub off on others, which can negatively impact the company’s culture, morale, and brand.

This is about more than just fair pay. It’s about employee satisfaction and well-being, which are directly related to engagement, long-term retention, and the company’s bottom line.

What’s going on here? In my experience, employers don’t intend to discriminate or treat their employees inequitably, but it still happens. Companies in places like Silicon Valley operate in a very expensive, competitive, rapidly changing environment, where the focus is on core business objectives of developing and delivering products and services. There are lots of plates spinning, which doesn’t leave a lot of time to develop proactive, strategic approaches to human capital.

The result? Companies often proceed in reactive, fire drill mode and end up making a lot of subjective, uninformed decisions about employees.

likely to feel adequate and committed. Life in the big city is stressful enough. If work is one of the problems, it’s a recipe for general unhappiness.

So, we have employees and employers who are always looking for something better. Is possible to do things differently, to create more happiness, satisfaction, camaraderie, and stability?

I think we can. And here’s how. Let’s start with some honest advice: If you run a company or an HR operation and you truly want things to be different, then change starts with you. It’s time to cut the excuses—“We don’t have time. We’re getting by. It’s too much work. We’ll figure it out later.” It’s time to stop accepting that reactive, subjective pay decisions are just part of the game. It may be the norm, but it doesn’t have to be (and shouldn’t be). And it’s costing you more than you know.

Let’s take a stand and change the game.

Revamping your people programs is key. It will take some work, but it’s no more challenging than the work you do every day. You want employees who stick around for more than a year? You want to attract the best talent, and to avoid creating or exacerbating discontent? Great—now is the time to take action, to get beyond the short-term plan and create a foundation where pay, benefits, and opportunities empower your employees. Now is the time to stop treating the “nice-to-haves” as the necessities that they are. Figure out your mission. Figure out how to create an ecosystem that builds up employees and fosters deeper human connections across teams.

This might sound daunting, but you don’t have to go it alone. We manage many of these projects to completion in just two to three months; the process is pretty straightforward and systematic. Your biggest challenge will likely be giving the project the green light.

When you consider the number of potential benefits, that decision should be easy.

Employers who can make informed, consistent decisions about employees are well-positioned to operate in a transparent, equitable manner. The downstream effects include a more stable and cohesive workforce, improved morale, greater loyalty, stronger internal relationships among employees, and a more harmonious, meaningful work/life experience.

All of that is a boon for you and your company, and could well take the edge off of city life.

Every company has an opportunity to get this right—to create a more stable and productive workforce, and to bring a bit of sanity and calm to their harried, coffee-infused corner of the world.

And those decisions can hurt.

The reactive, business-as-usual approach—“the norm” in many startups and private companies with 500 or fewer employees—creates huge problems. It’s not uncommon to find companies where the most senior employees have only been there for 2 years. Or for an entire team to be made up of employees hired within the last 3 months. Or to hear about employees always ready to jump ship for a better opportunity. If employees’ needs aren’t being met, they’re less 36

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Clifford Stephan, Principal OneCompensation clifford@onecompensation.com www.onecompensation.com

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39

How Can Employers Defend Discrimination Claims After Vawter v. Du Pont?

By ROBERT MEYERS and MEGHAN MCMAHON

Imagine you are the owner of a company, and you are looking to hire a dozen employees to fill vacant operations positions in your plant. You establish qualifications for the position and solicit applications. After 421 candidates apply, you narrow the pool of applicants based on their previous experience and performance on an operator exam. Ultimately, 34 qualified prospects are invited to interview. How do you conduct an interview process to fairly select which applicants to hire?

Since the candidates have already been evaluated on experience and knowledge, you tailor the interviews to dig deeper. Each candidate is experienced and knowledgeable, but how will they apply their knowledge and communicate with others to work effectively on a selfsupervised team?

You decide to compose two separate panels of interviewers to evaluate each candidate’s responses to the same questions. The questions are specifically designed to measure soft skills that would not come across on paper—how well each applicant communicates, presents ideas, troubleshoots, resolves conflicts, and handles difficult or stressful situations.

Candidates are evaluated in two one-hour sessions—one with each panel—and each panelist uses standard criteria to score the interviews on a 1-5 scale (with 1 rating lowest and 5 rating highest). You instruct the interviewers that they may take notes, but notes do not need to be submitted and will not be retained. They need only report scores for each candidate, which are then added together to create a composite score out of 40.

You hire the 12 candidates with the highest scores.

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What did you do wrong?

“Nothing,” you say, but what if all the candidates you hired happen to be younger than another, unsuccessful applicant?

This particular applicant is 59 years old and has nearly four decades of experience—more than most successful applicants.

According to your panelists’ scores, though, only 3 of the 34 candidates performed worse than he did in his interview.

The unsuccessful applicant sues for age discrimination under the Tennessee Human Rights Act. You are stunned but confident the case will be dismissed, since the applicant’s poor interview score serves as a documented, legitimate nondiscriminatory reason for selecting other candidates over the 59-year-old.

But what if the case goes to a jury trial? As the plaintiff’s proof is presented, the applicant testifies he believes he provided satisfactory answers to the panel. He has no evidence your company discriminated aside from his own subjective belief that age was a determining factor.

Your company’s defense focuses on his poor interview performance, as evidenced by a low composite score and testimony of panelists who conducted the interviews. Since the company has a legitimate nondiscriminatory reason for not hiring the 59-yearold, the burden shifts back to the applicant to demonstrate pretext by showing (1) the company’s stated reasoning is false, and (2) age discrimination was the real reason he was not hired.

He has done neither. Instead of requiring the applicant to present proof supporting his own professed belief, the court is somehow persuaded that since your company did not retain panelists’ notes from the interviews, the jury must weigh the credibility of witness testimony to “make a factual determination” of how the applicant performed during the interview.

Put differently, the applicant’s own self-assessment is considered equivalent to the opinion of a panelist who was actually tasked with evaluating each of the candidates, and jurors are asked to determine which witness appears more truthful on the stand.

The hypothetical situation you just considered was not hypothetical at all for Du Pont, the defendant plant owner in the recent Tennessee case Vawter v. E. I. du Pont de Demours and Company. The case was submitted to the jury with credibilitycentered instructions, and the jury awarded the 59-year-old $100,000 in compensatory damages. The trial court further awarded $112,120.07 in front pay, plus attorney’s fees. Du Pont appealed, and the Tennessee Court of Appeals deferred to the jury’s credibility assessment in affirming the holding, reasoning the applicant’s testimony provided “some evidence” that Du Pont’s decision not to hire him was pretextual.

The appellate court’s holding inspires more questions than it answers—chief among them, how can employers defend themselves in discrimination claims? The law is well-settled that a plaintiff’s subjective belief is insufficient to demonstrate pretext and sustain a discrimination claim, yet that is exactly what the Vawter court has done.

Given Vawter’s precedent, how can well-intentioned employers avoid discrimination-related litigation? By elevating a job applicant’s opinion testimony and self-assessment of his interview performance to evidence in fact of the quality of his interview responses, the courts have opened the door for any job candidate to drag employers or would-be employers to court.

When courts require only a subjective belief of discrimination before placing the outcome in the jury’s hands, what remains to disincentivize potential plaintiffs from bringing meritless claims in hopes of pressuring employers into settlement?

Moreover, couching the issue as one of credibility completely misses the real question of whether Du Pont acted with discriminatory animus. The issue at the heart of Vawter is not how the

The issue at the heart of Vawter is not how the applicant actually performed in his interview, but rather how Du Pont’s designated panelists believed he performed and on what criteria they based their decision. applicant actually performed in his interview, but rather how Du Pont’s designated panelists believed he performed and on what criteria they based their decision. The court’s decision hinged on the applicant’s testimony that he believed his responses were satisfactory. But what role does an applicant’s self-assessment of his qualifications play in an employer’s hiring decision?

On the other hand, how much weight is given to the opinions of a panelist hand-picked by the employer to evaluate candidates for job fitness?

The issue is not one of truthfulness and accuracy at all. Since the company’s assessment of the applicant is inherently a judgment call, there is no factual dispute between the witnesses’ testimony. Both the applicant and the panelist could have testified accurately as to their opinions. The only fact the applicant’s testimony establishes is that he disagrees with the panelists’ assessment of his interview, which is not proof that the company’s reason for not hiring him is false or that the real reason for not hiring him was age discrimination.

Furthermore, whether or not a candidate interviewed well enough to earn an employment offer is inherently relative. The applicant’s qualifications and interview responses are not considered in a vacuum; he is being compared to 33 other qualified and knowledgeable candidates. The panelists’ perception of how well the applicant interviewed is necessarily dependent upon the performance of other candidates interviewed—of which the applicant has no knowledge.

Consider also the implications of the court’s explanation that a credibility contest was necessary because notes from Du Pont’s interview process were unavailable. What would the physical notes change in an evidentiary sense, particularly when the same panelists who performed the evaluations drafted the notes? The Court implies that the notes would have been credible because they were written by panelists; yet, panelists were available and did in fact testify to personal knowledge of the applicant’s interview.

If testimony and written notes are simply two forms of the same information, why should the analysis differ? And if it does not differ, how much evidence will courts require employers to introduce to demonstrate they are “more credible” than a plaintiff’s subjective belief? Why were composite scores insufficient to corroborate the panelist’s testimony that the applicant’s interview was unimpressive, if such corroboration was even necessary at all?

Did Vawter effectively just flip the burden onto defendant employers to demonstrate lack of pretext? If so, how are employers supposed to meet this new burden of proof?

Robert D. Meyers, Attorney Glankler Brown. rmeyers@glankler.com www.glankler.com

Meghan McMahon, Attorney Glankler Brown. mmcmahon@glankler.com www.glankler.com

Learn more at www.memphisbusinessgroup.org/mbgh2016annualconference

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7 Reasons That Emotional Intelligence is Quickly Becoming One of the Top Sought Job Skills

By HARVEY DEUTSCHENDORF

According to the World Economic Forum Future of Jobs Report, emotional intelligence will be one of the top 10 job skills in 2020.

The awareness that emotional intelligence has become an important job skill, even surpassing technical ability, has been growing over the last number of years. A Career Builder Survey of more than 2,600 hiring managers and human resource professionals found the following: 71 percent stated they valued emotional intelligence in an employee over IQ 75 percent said they were more likely to promote a high EI worker 59 percent claimed they would not hire someone with a high IQ if they had low EI There are a lot of reasons that high emotional intelligence skills are increasingly sought after by those hiring. Here are the 7 most common reasons that employers value people with high emotional intelligence.

areas that they can improve in rather than taking the information as criticism of their performance. Their strong sense of self will allow them to realize areas of improvement as opportunities to improve their performance and making them even more productive and valuable employees.

› More Empathetic Towards Others Team harmony and working well together calls for staff to be aware of and respond effectively to the feelings of others. People with high emotional intelligence are able to use their understanding of where others are coming from to create higher levels of trust and cohesiveness. This allows teams to focus on the task at hand rather than become embroiled in internal bickering and politics. Their sensitivity to the needs of others acts as a lubricant that allows team members to effectively gel and work together.

› Set an Excellent Example for Others Their ability to not become flustered when things don’t go according to plan and the gift to get along well with others assists colleagues look up to and want to emulate people who have a high level of emotional intelligence. They are people who have a high level of influence in an organization even if they don’t hold titles or official designations. Their example of rising above the daily irritations and problems earns them respect from those above them as well as their colleagues.

› Make More Thoughtful and Thorough Decisions

Handling pressure and functioning well under high stress situations requires an ability to manage our emotions. People with higher levels of emotional intelligence are more aware of their internal thermometer and therefore better able to manage their stress levels. They have better developed coping mechanisms and have healthy support systems that allow them to work effectively even in highly stressful situations. The increasing rate of change in the workplace will increase stress and put a premium on those who are able to manage the increased stress.

Because of their ability to more clearly see things from another’s point of view, highly emotionally intelligent people are able to make better judgements on how their decisions will impact others. Not only will this result in better decisions but due to their sensitivity they will be better able to do more effective damage control in the case of decisions that will have some negative impact. Being able to better judge the impact of decisions allows them to be more proactive and anticipate the reactions of others to a decision.

› Increased Level to Understand and Cooperate With Others

› Bringing it All Together

As teamwork becomes increasingly important in the workplace, people who are able to understand, get along with and work well with others will become increasingly sought after. Highly emotionally intelligent people have well developed people skills allowing them to develop relationships with a diverse range of personalities and people from various cultures and backgrounds. An asset for people who are able to work well with others have sought after attributes in an increasing globalization and evolving diverse workplace.

With the rates of change and pressures in the workplace increasing, people who have enhanced ability to adapt to change, manage their emotions and work well with a diverse range of people will become much sought after by employers and human resource departments in all areas of the workplace.

› They Are Better Able to Handle Pressure

› Are Good Listeners Everyone has a strong desire to be heard and understood. The ability to effectively listen and respond to others is crucial in developing good working relationships. Most people are too busy thinking of how they will reply to be able to actively listen to what others are saying. Because of their increased ability to understand others, highly emotionally intelligent people are in a better position to put their own emotions and desires aside to respond and focus on listening to what others are saying. Their ability to pick up others emotions allows them to pick up on tone of voice and body language; strong indicators of what is going on with the speaker.

› Are Open to Feedback Open, timely and honest feedback is essential to job performance. People with highly developed emotional intelligence will be less defensive and more open to feedback, especially when it involves areas of improvement. Their high level of self-regard will allow them to look positively at 42

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Harvey Deutschendorf is an emotional intelligence expert, internationally published 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 published in 4 languages. Harvey writes for FAST COMPANY and has a monthly column with HRPROFESSIONALS MAGAZINE. You can follow him on Twitter @theeiguy.

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43

impaired people. Stovall was not born blind, but he has been legally blind for over a quarter of a century. Diagnosed at the age of 17 with a degenerative eye illness that would eventually leave him completely blind in both eyes by the age of 29, Stovall has taken his experiences and used them as a powerful communication tool. Stovall began giving public speaking appearances with Dr. Robert Schuller of the religious themed program The Hour of Power, and for other prominent motivational leaders, in the mid-1990s, and soon thereafter he became a seasoned veteran of arenastyle public speaking events. Assuredly, Stovall’s own brand of motivational speaking with its combination of positive thinking and down to earth practical business sense, along with his decades long practice of honing his public speaking into an art form, influences his approach to communication in The Art of Communication. The co-author, Dr. Ray Hull, serves as a professor of Communication Science and Disorders Coordinator at Wichita State University, conducting research in audiology. Together, they provide a beautiful account of how communication must meet the needs of the audience over and above meeting the needs of the communicator.

What is the Art of Communication?

THE ART OF

COMMUNICATION: YOUR

COMPETITIVE

EDGE

by Jim Stovall and Raymond H. Hull

By PAULA HAYES

Stovall defines communication as both an “art” and a “science.” Where “art” and “science” meet is in interpersonal communication. We are each free to use language as we wish, but sometimes it is all too easy to forget that the listener, who exists on the other side of our communication, is equally endowed with the gift to creatively interpret our messages; these components, the communicator, the listener, the context and the delivery of the message, not to mention the message itself, each contribute to interpersonal communication. Stovall lays out four principles of interpersonal communication.

1. Interpersonal Communication is Not Optional 2. Communication is Irreversible 3. Communication Consists of an Endless Complexity 4. Communication Always Exists within Context

The prodigious Irish playwright, George Bernard Shaw, is famously quoted as saying, “The problem with communication is the illusion that it has been accomplished.” No doubt many of us have experienced moments in business, education, or heaven-forbid in our personal lives, when we have committed the cardinal sin of assuming that we had offered clear communication, only to later find out that the recipient of our intended communication did not grasp the meaning of the message as we had hoped. Since communication is an act that we all must engage in, it would seem that communication would be the most natural, and hence, simplest of enterprises; yet so often it is the case that communication, particularly in professional contexts, can remain quite elusive.

Most of us recognize that there is a qualitative difference between merely communicating and effectively communicating, and for those profoundly interested in replacing mere communication with effective communication this month’s book, The Art of Communication: Your Competitive Edge by the co-authors Jim Stovall and Dr. Ray H. Hull, is a must read.

Who are the Co-Authors?

You may recognize the name Jim Stovall from the company he helped co-found, and which he remains president of, the Emmy award winning Narrative Television Network (NTN); the impact of the network is far-reaching as it touches an audience of over 13 million blind and visually 44

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These four principles undergird the book’s main topics which include, “the art of nonverbal communication,” “the art of constructive listening,” the “the art of public speaking,” “the art of public relations and image,” and the “art of conflict resolution.” These main topics are covered in the book’s fourteen chapters. There is an ease to reading the book in part because Stovall disperses the larger conversation about interpersonal communication with anecdotes about his own and others’ successes and failures with communication. Through anecdotes, analogies, and metaphors, Stovall is able to illustrate to us what interpersonal communication is.

Stovall as a Storyteller and Analogy-Maker Stovall is completely on target with just how vital communication is to professional arenas. He reminds us, “In the corporate world, we spend a lot of time, effort, and energy having meetings to determine what we’re going to do, and when it will be done, why we’re going to do it, and which colleagues will perform what tasks.” Yet, given the amount of time spent planning communication and delivering it, it is important to pause and consider how fast the act of communication itself occurs. A business presentation may take ten hours to put together, a memorandum may take two hours to plan and write, the delivery of a sales pitch may take thirty minutes to put across to a boardroom, but the audience does not necessarily use the same amount of time or energy, or anywhere near it, when processing the message. If communication should go astray, communication fails can become rapid misfires; an interview or business deal can be lost in seconds if communication is unclear or a message is perceived wrongly, just as it can also be clenched in seconds if the communication is focused and clear.

Using football as an analogy Stovall gives an example to help us see that interpersonal communication requires a degree of team building. He reminds how “In a football huddle, within a few seconds, using terms

such as ‘blue 56 right stretch crossover on 2’ tells each participant where they should be and what they should do in a very specific detail.” Stovall observes that the team players know just what to do with that information too; for, “Football players know dozens of plays in various formations that create hundreds of variables, and depending on how the other team lines up, there can be literally thousands of permutations of each of the variables.

All of this needs to be identified, understood, and acted upon in seconds or even in fractions of seconds.” To this Stovall concludes about the process of interpersonal communication, “This communication precision is possible because each member of the team agrees upon a very narrow and specific definition of terms. I’ve often thought the corporate world, the academic world, and life in general could be improved by taking a few communication lessons from football players.”

The lesson from sports, which is only one of the many lessons Stovall offers, reminds us that communication follows rules, and one of the most important rules of the communication game is to understand how to adapt your message to fit the audience. This means spending some time considering the audience’s needs and expectations, not just the needs of the communicator. Too often communication does not work out the way we anticipated because we try to communicate in the form that is most comfortable to us, the form in which we find that we have the greatest ease, experience, expertise, and fluency as opposed to stretching ourselves and communicating in forms that are more accessible to the listener. I could not agree more with Stovall’s assessment of how “The form, level, and delivery of the communication must be geared to the recipient and not the person initiating the conversation. It is human nature to want to have everyone understand everything we are thinking as we communicate in the way in which we are most comfortable, but if you don’t adjust your communication to fit your audience, it will figuratively and sometimes literally fall on deaf ears.”

A very powerfully crafted anecdote that drives home the point that the audience’s needs matter over and above that of the communicator’s personal style of communication is an anecdote that Stovall shares about visiting a resort in California. Because he had visited the resort for years, the staff was well aware that he was blind; on a particular stay, the manager decided to offer a special plan for helping Stovall receive his phone messages. The manager informed Stovall that since he was not able to see the blinking red light on the hotel phone that indicates a phone message, the staff would write down the message and place the message under Stovall’s room door.

Stovall perceived that within the ill planned attempt to assist there was a valuable lesson about communication to be gleamed— “This was not a case of inattentive communication or inaccurate communication. It was a case of the communicators not understanding their audience.”

The Practical Side of Communication There is also plenty of practical advice to be found in The Art of Communication. If you have an interview to prepare for, or a PowerPoint Presentation to give, or you need to reconsider the signals your business attire is giving off, here too you will find this book instructive. There is practical wisdom to be had in dissecting the rules of effective PowerPoint presentations, just as there is in paying attention to strategies that make one a better, more active listener. This book covers all of it. Regardless of your communication needs, you will find this book one you will want to return to time and again. For as Stovall reminds us, “Language is often limiting and confining but sometimes it’s all we have to work with.”

Paula Hayes, Ph.D paulapoet1@gmail.com http://www.drpaulahayesenglish.org

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Tennessee Joins Many Other Southern States with Mandatory E-Verify

By BRUCE E. BUCHANAN

Tennessee has joined many other southern states – Alabama, Georgia, Mississippi, North Carolina, and South Carolina, in passing mandatory E-Verify for private employers, effective January 1, 2017, though it is eliminating many small employers from coverage.

employers with more than 10 employees to use E-Verify.

The number of employees is based on total number of employees employed nationwide, not just in Georgia, as of January 1, 2013, and includes any employee working at least 35 hours a week.

Illegal Immigration Reform and Enforcement Act The 2011 Illegal Immigration Reform and Enforcement Act is enforced by counties and municipalities requiring an employer to provide an affidavit concerning the business’s E-Verify registration, or exemption, prior to the county or municipality issuing a business license or other document needed to operate a business. This law applies to renewal of business licenses as well as initial licenses. The penalty for private employers’ failure to use E-Verify is the inability to receive a new or renewed business license.

Georgia Security and Immigration Compliance Act

Effective January 1, 2012 for large employees, and January 1, 2013 for all employers with six or more employees, the Tennessee Lawful Employment Act (TLEA) made Tennessee a unique non-mandatory E-Verify state. Under that law, an employer may enroll and use E-Verify for newly-hired employees, or it may copy and maintain a state-issued driver’s license or identification, unexpired U.S. passport, permanent resident card, work authorization card, birth certificate, certificate of naturalization, or a few other forms of identification from newly-hired employees. The TLEA, even as amended, requires “non-employee” individuals providing labor or services to an employer, to produce one of the above documents but not face E-Verify verification.

The 2006 Georgia Security and Immigration Compliance Act mandates the use of E-Verify for public contractors (including subcontractors & sub-subcontractors) providing labor or services of $2,500 or more of any kind to public projects. Contractors and subcontractors are required to obtain E-Verify affidavits confirming the company will obtain E-Verify affidavits from all subcontractors and sub-subcontractors. The primary contractor must submit copies of all affidavits to the public employer within 5 business days of receipt.

The penalties for public contractors are as follows: first offense - listed on www.open.georgia.gov; second offense - debarment from public contracts for 12 months. Furthermore, anyone who provides a false statement faces fine of up to $1,000 and imprisonment for 1 to 5 years.

A contractor or sub-contractor, who does not have any employees and does not plan to have any employees, must provide a state driver’s license/identification card of each independent contractor utilized in the completion of a public contract.

Tennessee’s New E-Verify Law Effective in 2017

Mississippi Employment Protection Act

During the 2016 legislative session, the TLEA was amended in several ways, the most important being that employers with 50 or more employees must use E-Verify for newlyhired employees. E-Verify has never allowed its use for current employees except under certain circumstances with federal contracts. The new law is effective on January 1, 2017. The old law still exists for employers with 6 to 49 employees, who are hiring new employees. The new law’s passage was fairly quiet compared to the legislative fight in 2011.

The second most important amendment to the TLEA is that it strengthens the penalties so that an employer faces a fine of $500 per day if it fails to remedy its E-Verify violation within 45 days of the state’s order. The existing penalties continue to be in effect. These are: First offense - $500 penalty + $500 per unverified employee or copy of documentation not maintained; Second offense - $1,000 penalty + $1,000 per employee not verified or copy of documentation not maintained; and Third offense - $2,500 penalty + $2,500 per employee not verified or copy of documentation not maintained. The same penalties apply to non-employees.

Under the Mississippi Employment Protection Act, all state agencies and employers are required to utilize E-Verify. A state agency is prohibited from entering into any contract unless the contractor or subcontractor is registered and participates in E-Verify. Also, all employers must only hire employees who are legal citizens or legal aliens. The penalties for violating the statute are loss of any business license or permit granted by the State of Mississippi, for up to one year; the cancellation of any state contract, and ineligibility for any state contract for up to three years; or both.

Brief History of E-Verify E-Verify originated as a program called Basic Pilot in 1997. As a federal law, an employer has never been required to enroll unless you were a federal contractor or sub-contractor who met certain dollar amounts for projects. However, some states have passed laws requiring the use of E-Verify. Arizona’s E-Verify law was found to be not preempted by the Immigration Reform and Control Act, and was upheld by the U.S. Supreme Court in Chamber of Congress v. Whiting, 563 U.S. 582 (2011).

Tennessee’s 2012 Law

Arkansas and Kentucky do not require E-Verify for any employers.

Georgia Georgia actually has two E-Verify laws with different penalties. The first is the Georgia Security and Immigration Compliance Act of 2006 which requires public employers and employers doing business with state agencies to use E-Verify. The second law, which is much broader, is the 2011 Illegal Immigration Reform and Enforcement Act, which requires all 46

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

EMPLOYERS AND LAWYERS, WORKING TOGETHER. LABOR AND EMPLOYMENT LAW For more than 35 years, Ogletree Deakins has built on the high standards of its founders and their dedication to exceptional client service. One of the largest labor and employment law firms representing management in all types of employment-related legal matters, Ogletree Deakins has more than 750 lawyers located in 49 offices across the United States and in Europe, Canada, and Mexico.

Register at www.ogletreedeakins.com/our-insights to receive updates on recent developments in labor and employment law.

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