Page 1

Volume 6 : Issue 3 TM


in Eliminating or Changing Performance Appraisals

How Employers

are Missing Out on the Psychology Behind Pay

2015 Mercer


Benefits Survey

Special Employment Law Issue

How to

Prepare for the

New EEO-1 Pay Data



SHRM Advocacy Team


Online Certification Exam

Prep Class





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

1715 Aaron Brenner Drive • Suite 312 • Memphis, TN 38120 • 901.526.0431






Bringing Human Resources & Management Expertise to You

44.5% of all EEOC charges in 2015 allege retaliation. 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

Scott Behrens Bruce E. Buchanan William Carmichael Laura K. Clayman Harvey Deutschendorf Debra Finney Susan Hanold Cindy Kolb Thomas L. Henderson Jennifer S. Kiesewetter Susan McCullah Anne T. McKnight Robert Ratton Clifford Stephan Kathy Tuberville 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 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: Meredith Nethercutt, SHRM Advocacy Team 9 I’m a Business Partner 12 Three Critical Questions to Ask When Building a Talent Strategy 24 Money Talks: How Employers Are Missing Out on the Psychology Behind Employee Pay 26 Academic Internships: A Higher Education Perspective 31 Employment Screening: Why You Should Screen and Monitor Existing Employees 34 Book Look: Reviving Work Ethic 37 Online SHRM CP | SCP Certification Exam Prep Class 38 7 Habits of People with Highly Positive Attitudes

Employee Benefits

14 The Ongoing Saga of the ACA Contraceptive Mandate: Where Are We Now? 18 2015 Mercer Employee Benefits Survey 20 DOL Proposed Changes to Overtime Regulations – The Waiting Game 32 When the DOL Sues on Behalf of Your Plan Participants, and Wins


Next Issue Talent Management and Recruiting– Deadline to submit articles and ads is March 10

Employment Law

10 Let the Madness Begin: Swimming in the deep End of the Office Pool 16 Trends in Eliminating or Changing Performance Appraisals 22 How to Prepare for the New EEO-1 Pay Data Requirements 28 Is Revenge Best Served Cold? EEOC Seeks Input on Proposed Enforcement Guidance on Retaliation and Related Issues 30 What if You Suspect a Green Card is Fraudulent? 36 EEOC Training

Industry News 6 7 8 13 27 35

Preview of 26th Annual SHRM-Atlanta HR Conference Preview TNSHRM State Conference September 14-16 in Memphis Preview of ARSHRM State Conference in Rogers April 6-8 in Roger Preview of TNSHRM Strategic Leadership Conference April 8 in Nashville Preview of 2016 SHRMGA State Conference September 18-20 in Augusta The Value of Employer Clinics at the University of Memphis March 17


a note from the Editor We have a preview of the 26th Annual SHRM-Atlanta HR Conference that will be held March 29-30 at the Cobb Galleria Centre in Atlanta. We are looking forward to bringing you highlights of this exciting conference in our May issue. A preview of the SHRMGA State Conference September 18-20 in Augusta is on Page 13. Early bird registration is available until August 30.



arch is a very important month for all HR professionals as the annual SHRM Employment Law and Legislative Conference is March 14-16 in Washington, DC. We are excited to be a media sponsor and look forward to bringing you highlights

We are also excited about the ARSHRM HR Conference & Expo April 6-8 in Rogers. A preview and registration details are on Page 7. We also have a preview and registration details of the TNSHRM Strategic Leadership Conference in Nashville on April 8. Highlights from these two excellent conferences will be in our May issue. SHRM-Memphis will be hosting the 2016 TNSHRM State Conference September 14-16. Pre-early bird special rate is available until April 30.

from the Conference in our April issue. This is one of my favorite SHRM conferences because we have the opportunity to visit Capitol Hill and personally meet

with our State Legislators and other government officials. We are honored to have Meredith Nethercutt from the SHRM Advocacy Team on the cover. Mike Aitken, SHRM VP Government Affairs, will be the keynote speaker. His topic

As always, please join us for our monthly complimentary HRCI virtual event sponsored by Data Facts on March 23. Watch your email for details! If you are not currently receiving our monthly invitation, you can subscribe on our website at

is Countdown to November: The Washington Outlook for HR Public Policy. Doris Kearns Goodwin, presidential historian and Pulitzer Prize-winning author will present, Every Four Years: The 2016 Presidential Campaign. The Honorable Eric Holder, Jr., 82nd Attorney General of the U.S., will also be speaking. It’s not too late to register for this fantastic conference! If you are unable to attend, you can follow me on Twitter @cythomps as I will be tweeting about the exciting events and speakers. We will also be providing daily updates on Facebook and Linkedin. Please email me and let me know if you plan to attend so we can link up while there!



Cynthia Y. Thompson | Editor

March 14-16, 2016 Washington Renaissance Washington, D.C.

Meredith on the cover



Meredith Nethercutt is senior associate for member advocacy at the Society for Human Resource Management. Overseeing SHRM’s Advocacy Team (A-Team) network of volunteer advocates, Meredith facilitates relationships between SHRM members and lawmakers to strengthen the Society’s advocacy objectives in legislative districts nationwide. In addition, Meredith provides training and guidance to HR advocates on how to effectively communicate with lawmakers regarding workplace policies. A critical part of the Society’s enhanced advocacy initiative, the A-Team advances the HR perspective and agenda by leveraging the reach and knowledge of SHRM members through grassroots advocacy. Prior to joining SHRM, Meredith served as director of public affairs and grassroots advocacy at the National Association of Manufacturers (NAM), where she oversaw the complete association advocacy program branding and reorganization, as well as the construction of a strategic association-wide key contact program to leverage relationships between manufacturers and federal lawmakers. Meredith’s previous career experience includes advocacy positions with the International Franchise Association (IFA) and the National Restaurant Association, where she managed both associations’ grassroots programs. She started her career in advocacy at Associated Builders and Contractors. Meredith received a Bachelor of Science degree from Vanderbilt University. She resides in Denver, Colorado. 


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Let the Madness Begin: Swimming in the Deep End of the Office Pool By ROBERT RATTON


hen I was in high school, a dermatologist spoke at a

Beware of the Boss Button

school assembly a few weeks before summer break.

While the office pool is unlikely to make you a target of a federal investigation, it does pose several very real issues. One of the foremost issues is the decrease in office productivity. The first week of March Madness is a blitzkrieg of basketball at all hours of the day. With live streaming, your employees have instant access to the games on both work computers and their smartphones. The NCAA even has a “boss button” on its streaming website that causes a spreadsheet to pop up over the game to divert a supervisor’s prying eyes. The participants in pools are not isolated to a few die-hard sports fans. An MSN survey of the general public found that 86 percent of the respondents plan to dedicate some of their work day to keeping up with their brackets. Over half of these respondents intend to spend an hour or more a day on March Madness-related activities.

On a large screen in front of a horde of teenagers, he popped up a picture of an overly toned and tanned couple wearing nothing but bathing suits

and smiles. All eyes were riveted. The dermatologist looked at the crowd and said, “You might see two beautiful people at the beach, but what I see are the beginning stages of skin cancer.” Sitting in that auditorium, I thought, what kind of person does this? What kind of person sets out to ruin our good time with the unnecessary inter-

vention of reality? Well, today, I am the labor and employment equivalent of that dermatologist. This month’s article takes a critical look at a beloved office staple, the March Madness pool, and attempts to lay it bare. For a good number of offices across the country, March Madness is a hallowed tradition. Bragging rights are on the line, and people across departments come together for friendly competition and a modest payday. According to the American Gaming Association, over $2 billion will be wagered across 70 million NCAA brackets. This number is staggering, but not entirely surprising to anyone who has been a surface dweller since the advent of the Internet. In offices, schools and homes, Bracketology is the preferred discipline of March. However, there are potential costs to these traditions. These costs can come in the form of lost productivity and greater exposure to legal risk.

All of this work time activity comes at a considerable aggregate cost. As stated in a 2014 survey by Challenger, Gray & Christmas, Inc., time spent by employees watching March Madness conservatively will result in $1.2 billion being paid to employees to keep up with their standings in the office pool, instead of taking part in productive work. Not only are employees wasting time, they are placing a substantial drain on company bandwidth. According to some IT experts, demand on network bandwidth will increase threefold during March Madness. Employers should know that this heightened use is not limited to office computers. Smartphones with Wi-Fi access can also place a significant burden on the IT system. The end result is a slower operating speed for those attempting to work productively.

The Al Capone of the Accounting Department

Come One, Come All

When Phil from accounting approaches you about your $5 bracket buy-in, it is not likely that you will associate him with the shady underworld of illegal gambling. Nevertheless, in a technical sense, most office pools are classified as illegal gambling under state and federal law. In 2010, the manager of an office pool in New Jersey became acutely aware of this reality when the police raided his house. In 1992, his office pool had started off as a game among co-workers and friends with a $50 buy-in. By 2009, the pool had grown to 8,000 participants with a potential payout of $800,000. From a practical sense, this example is rather extreme. Very few law enforcement investigations have spent the time and used the resources necessary to bust an office pool with a gross payout of less than a nice dinner. That said, the company should never turn a blind eye to any infraction of the law. Just as companies have safety policies that prohibit speeding in company vehicles, businesses need to have policies in place that prohibit gambling on company computers.

Another distinct concern raised by the office pool is its effect on your non-distribution and non-solicitation policies. Most companies have a policy that prohibits the distribution of literature in work areas, as well as solicitation during work hours and in work areas. However, these policies must be applied uniformly, regardless if the solicitation is for union activity or March Madness. The Sixth Circuit, which includes Tennessee, Kentucky, Michigan and Ohio, upheld the National Labor Relations Board finding that an employer who allowed the distribution of handouts for office pools in the work space could not limit union activity in the work environment. United Parcel Service v. National Labor Relations Board, Nos. 99-5226, 99-5031 (6th Cir. 2000). In this case, UPS had a policy that prohibited the distribution of written or printed materials in the work area. One of its employees violated this policy by attempting to distribute union literature in a work area. However, the


administrative law judge found, and the Court upheld, that employees commonly broke this policy for a wide range of activities, including distributing information about hunting contests and fishing tournaments. The distribution of materials soliciting involvement in March Madness is arguably of little difference. If you let your employees distribute literature for an office pool in the workplace, there is a likelihood that you will need to let them distribute literature for a union. The problem becomes even more complicated with the use of the Internet. The overwhelming majority of these brackets are maintained online. Employees check their brackets and send emails to each other frequently over office email. By allowing distribution of office pool material in the work area and over office computers, you very well could open the door to distribution of materials about which you are much less excited.

Odd Man Out Office pools, which can often be justified on their contribution to company morale, can frequently lead to resentment by those not included and those who narrowly miss the glory. A recent study showed that men are roughly twice as likely as women to take part in March Madness office pools. When supervisors are involved, this discrepancy can lead to feelings of being left out, not offered the same level of access to management and concerns of gender or sex discrimination. Furthermore, even when everyone is included, some people do not handle losing well. In the above-mentioned case about the man from New Jersey, one less-than-happy office worker, who could not convince another participant to split the pool with him, decided the best reaction was to beat him senseless. These hard feelings are compounded when participating individuals suffer from gambling addictions. Office pools that grow to large stakes with the wrong group of people pose a distinct threat of disruption.

What to Do At the end of the day, your workforce is going to create office pools of some sort. These events have many admirable results. A good office pool can foster comradery among people that rarely interact. Also, a blanket rule that condemns all office pools is tantamount to telling your child that Santa doesn’t exist. So the question becomes: how should you hedge your bets? A few suggestions: • Create company-sponsored office pools that do not run afoul of federal and state gambling laws. For example, the reward for the successful person can be a relaxed dress code, company-sponsored lunch for his or her department, or donation to the charity of his or her choice. • Do not allow people to solicit for pools during work hours. Also, prohibit the distribution of materials during work hours and in the workplace. • Train managers to look for signs of gambling addiction and to be attentive to problems that can arise. • Talk to your IT department to determine how they plan to handle the increased demands that March Madness poses. Best of luck to all of us this coming March.

Robert Ratton, Attorney Fisher & Phillips LLP


Three Critical Questions to ask when building a

Talent Strategy By SUSAN HANOLD

Think back to what’s happened to creating strategies. In the past, creating 5 year plans were the norm. It became common to see 3 year plans to now seeing 1 year plans. More and more HR organizations are struggling to actually write down and execute on a Talent Management strategy. There are many possible reasons for this. HR organizations need to be able to pivot and adapt to the market changes quickly.

As HR professionals build out their talent management strategy, there are 3 critical questions to ask. 1) What are you doing to develop and retain your current employees? Some HR Professionals are struggling to fill key roles. It’s in the news about the talent shortage and the war for talent. HR professionals are asked frequently about turnover and asked to react quickly to filling open job positions. SHRM’s 2015 Human Capital Benchmarking Report shows the average cost-per-hire going up 21% from two years ago. Cost-per-hire is one of the top metrics HR professionals track because it is a financial measure that relates to hiring efficiency. There are metrics that should be part of the discussion around training, engagement, retention and leadership development. Many times the focus shifts away from how do I develop and keep current employees engaged and productive as possible. Some businesses are rehiring retired employees to come back to work either part-time or full-time. According to Josh Bersin, of Bersin by Deloitte, “tenured employees hold great value to organizations.” Organizations are leveraging universities to build out customized industry training programs to Keep the middle-managers engaged and developed.

2) Are you prepared for a multi-generational workforce? When building out a talent management strategy, it is important to know your current and future workforce. With multiple generations of employees that are now entering the workforce one-size does not fit all. You may want to consider this exercise. For each generation in the workforce such as Traditionalists, Baby Boomers, Generation X, Millennials and Generation Z find out where the majority of your front line employees, managers and executive leaders fall. As you develop your talent management strategy, a variety of methods may need to be considered based on your findings. Generation Y and Generation Z view college differently too. It’s not about the paper rather it’s about the skills. College isn’t particularly important to Gen Z. The first truly digital natives are sure to provide employers opportunities as well as challenges. 12

3) Have you evaluated workforce trends? HR professionals have to balance the vision that some employees want to work in a self-empowered team and work where and when they desire. While the reality may be for key roles that you have challenging service work, work schedules driven by safety requirements and the need for close monitoring of work hours. Thinking through the vision that employees may have about how they want to work and the reality are clashing in some organizations. Do your HR policies align with talent management goals and strategy? It is vital in your strategy to have insights into workforce diversity, trends and compensation. The reality is that there are job hoppers that leave at an alarming rate for jobs quickly that they may perceive are in line with the market rate. According to the ADP Research Institute, the part time workforce is younger and older than the full time workforce. HR professionals are now hearing from employees that are going into the office are now having to collaborate differently with so few people in the office, either from working remotely or availability to flex time. In ADP Research Institute's 2016 Evolution of Work study, a global look at workplace trends across 2,000 individuals in 13 countries, there is fear that automation and smart machines will replace work being done by humans. It’s important to know the skills and competency needs of your future roles so that you are able to build development plans for current employees with enough time to grow into these future roles or make other plans. As employers strive to remain competitive, they will need to consider their current and future workforce needs and integrate it into their talent management strategy.

Susan Hanold, PhD VP, Strategic Advisory Services

Transformational Leadership Different leadership approaches impact the direction and the potential success of an organization. To successfully deal with change, all HR executives need the skills and tools for both strategy formulation and implementation. Transformational Leadership, the topic of this year’s conference, is defined as a leadership approach that causes change in team members’ focus, with the end goal of developing them into leaders who will take greater ownership for their work. Register now to join us and learn the tools and techniques to transform your team.


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The Ongoing Saga of the ACA Contraceptive Mandate: Where Are We Now? By SCOTT BEHRENS, J.D.

Compliance with the Affordable Care Act (ACA) has been a financial and administrative challenge for most employers, but the challenge has been even more fundamental for many religious employers. The ACA mandates that certain preventive-care benefits be covered at no cost by nongrandfathered health plans. Among the required preventive care benefits are all contraceptive methods approved by the Food and Drug Administration (FDA). Various religious orthodoxies have historically condemned contraceptives, especially items and drugs viewed as terminating life (abortifacients) rather than preventing it. Religious organizations and even private employers teaching and ascribing to these beliefs have lobbied and litigated for a broad religious exemption from the reaches of the contraceptive mandate. At the same time, federal authorities tasked with enforcing the ACA have attempted to reconcile these religious objections with the wording of the ACA and other laws, the unique health needs of women, and the cost and education barriers that impede many women from obtaining medical care. This very public debate that has involved federal authorities, the Supreme Court, interest groups and individuals has left many confused about where the mandate comes from, what it says and how it applies to different groups. In this white paper, we attempt to combine and summarize the complex and many times disjointed answers federal authorities have provided to these important questions. How Did the Contraceptive Mandate Come About? The contraceptive mandate is part of a broader ACA provision stating that all nongrandfathered health plans must provide certain preventive services based on recommendations made by specified expert medical and scientific federal agencies. These agencies develop and modify lists of recommended services, which trigger coverage by nongrandfathered employer-provided health plans. Lockton comment: Plans subject to the mandate generally must begin covering a newly recommended preventive item, drug or service by the first plan year following the one-year anniversary of the date the item or service is added to the list. When a plan is insured, the insurer might provide the sponsor with the opportunity to begin coverage immediately. One such agency, the Health Resources and Services Administration (HRSA), is responsible for 14

providing recommendations related to women’s health. In August 2011, the HRSA published its first recommendations for women, which included a broad range of items and services, including all FDA-approved contraceptive methods, sterilization and counseling. Nongrandfathered plans were required to provide these drugs, items and services without imposing cost-sharing (e.g., copayments, deductibles or coinsurance) beginning with the first plan year beginning on or after Aug. 1, 2012. Lockton comment: It is important to note that the literal text of the ACA does not specifically mandate coverage of contraceptives without cost-sharing. Rather, that requirement comes from the HRSA recommendation incorporating the FDA’s findings, both of which are subject to change. Accordingly, the HRSA and the FDA may expand or contract their standards, subject to medical and scientific research and expertise. What the Contraceptive Mandate Requires There are 18 different female contraceptive methods outlined in the FDA’s Birth Control Guide. These include barrier, injectable, oral and emergency contraceptives. Plans subject to the mandate must make each method available, but the plan can limit the number of options available within each method. Additionally, plans may cover a generic drug or device without cost-sharing and impose cost-sharing for equivalent brand name drugs or devices. EXAMPLE: A nongrandfathered plan that makes oral contraceptives available without cost-sharing would still need to make injectables available without cost-sharing; however, it could limit which types of injectables are covered without cost-sharing and/or limit no-cost coverage to generic injectables. Plans that impose cost-sharing on some options within a contraceptive method, or exclude coverage for certain options, must establish a process by which women can obtain a waiver. Costs that would otherwise be charged to the woman must be waived at the recommendation, based on medical necessity, of the woman’s healthcare provider. Medical necessity can include considerations such as side effects and the woman’s other health factors. Where services are required as part of the contraceptive mandate (e.g., implantation of an intrauterine device or birth control counseling), the plan may impose cost- sharing for the office visit when the contraceptive services are billed separately by the provider or when the preventive services are not the primary purpose of the visit. Further, plans subject to the mandate may impose cost-sharing

when services are performed by an out-of-network provider when an in-network provider is available. Who Must Comply With the Contraceptive Mandate? The ACA requires all nongrandfathered employerprovided health plans to comply with the preventive care mandate, including the mandate to provide contraceptives without cost-sharing. This is true regardless of plan size, and regardless of whether the plan is self-funded or fully insured. Grandfathered plans are completely exempt from the preventive care mandate. If preventive care benefits are provided, a grandfathered plan may impose cost-sharing requirements. Lockton comment: For a plan to be grandfathered, it must have been in existence on the date the ACA became law (Mar. 23, 2010) and must not have made significant plan design changes (e.g., eliminating benefits or increasing coinsurance percentages). Increased cost pressures and the desire to make plan design changes have led most employers to forgo the grandfathered status of their health plans. The ACA does not include an exception from the preventive care mandate for plans of religious employers. Instead, federal regulators—sometimes with the prodding of the courts—have carved out exemptions and accommodations for certain religious employers. As a result, some plans are exempt from the contraceptive mandate, some must comply with the mandate subject to an accommodation and others must strictly comply. Lockton comment: Note that the exemption and accommodations for religious employers apply only to the contraceptive mandate and not the other preventive benefits established by the ACA. This is different than the exemption for grandfathered plans, which applies to all preventive benefits, not just contraceptives. Some religious employers have maintained the grandfathered status of their health plans in order to avoid the need to take advantage of the broader exemption available to grandfathered plans. The added bonus for these employers is they do not have to worry about qualifying for the exemption or accommodation discussed below. Plans Exempt From the Contraceptive Mandate In the wake of vocal opposition to the contraceptive mandate, federal rules were established to provide a narrow exemption that applies only to nongrandfathered plans sponsored by the following nonprofit employers:

❖ Churches ❖ An integrated auxiliary of

a church

❖ Conventions or associations of churches ❖ An entity performing the exclusively religious

activities of a religious order

This exception has been colloquially termed the “house of worship” exception because of its narrow application. Lockton comment: The exemption as originally written would have required that the employer’s purpose be the inculcation of religious values and that the employer primarily employ and serve individuals who share the religious tenants of the organization. These onerous requirements were abandoned in the present exemption. Employers that meet this exemption are not required to offer contraceptives to their health plan’s female enrollees, and they are not required to certify as to their exempt status. Instead, exempt employers may simply communicate to their insurer or third-party administrator (TPA) which contraceptives, if any, are covered, and the insurer or TPA is not required to separately provide the contraceptives objected to by the exempt employer. Although not clear, it appears that no cost-sharing can be applied to contraceptive benefits voluntarily covered by the plan. Plans Eligible for an Accommodation The narrow exemption discussed previously does not apply to many other employers with religious objections to contraceptives. Instead, these other employers are offered an accommodation. The accommodation is meant to allow eligible employers to avoid the requirement to provide some or all contraceptives while still providing access to no- cost contraceptives to women covered by those health plans. This is accomplished by transferring to the plan’s insurer or TPA the responsibility to offer and pay for the contraceptives to which the employer objects. Lockton comment: Employers can, consistent with their religious beliefs, claim an accommodation for some or all contraceptives; however, contraceptives for which an accommodation is not obtained must be covered without costsharing. For example, at the time of the Burwell v. Hobby Lobby decision, the Supreme Court decision (discussed below) that extended the accommodation to for-profit private companies whose owners opposed certain contraception methods, Hobby Lobby objected to four of the FDA-approved contraceptive methods but included coverage in its health plan for the remaining methods.

1. On account of religious objections, opposes providing coverage for some or all of any contraceptive services otherwise required to be covered. 2. Is organized and operates as a nonprofit entity. 3. Holds itself out as a religious organization. 4. Self-certifies that it meets these criteria in accordance with the provisions of the final regulations. In light of the 2014 Supreme Court decision in Burwell v. Hobby Lobby, federal authorities extended the accommodation to closely held for-profit employers. For this purpose, closely held means two things: 1. No ownership interest in the for-profit entity is publicly traded. 2. More than 50 percent of the value of the for-profit entity is owned directly or indirectly by five or fewer individuals (or a “substantially similar” ownership structure applies). For-profit, closely held employers claiming the accommodation must also self-certify in order to claim the accommodation. An eligible religious employer that is not a house of worship can self-certify and obtain an accommodation in one of two ways: 1. Complete EBSA Form 700 and send a copy to each health insurance issuer and TPA for the plan. 2. Notify the Department of Health and Human Services (HHS) of its name, its eligibility for the accommodation and its religious objection and identify each of its plans’ insurers and TPAs. A model notice is available for use in notifying HHS. HHS will then notify each insurer or TPA. Regardless of the method chosen, the result is the same: An insurer or TPA that receives notification is responsible for providing the objected-to contraceptives at no cost to enrollees in the employer’s plan. Insurers and TPAs must annually notify participants and dependents covered under a plan sponsored by a customer that self-certifies. The notice lets covered individuals know that the sponsor does not fund contraception benefits, but the insurer or TPA will pay for them. Lockton comment: For certifying employers whose plans are self-insured and subject to ERISA, the TPA literally becomes the ERISA “plan administrator” when it comes to contraception benefits. The TPA picks up the obligation to establish and operate procedures for processing claims for contraception benefits, and complying with disclosure and other requirements applicable to group health plans under ERISA for such benefits. Presumably, the TPA has an obligation to provide an SPD-like summary of contraception benefits and provide other disclosures and reports.

The accommodation applies to both nonprofit religious employers (e.g., religiously affiliated hospitals and schools, including student health plans for schools) and private, closely held employers that object to contraceptives (e.g., Hobby Lobby; see discussion below).

Initially, the insurer or TPA is on the hook for paying the costs associated with providing the contraceptives to which the employer objects.

A nonprofit religious employer for this purpose includes one that meets four criteria. The employer:

The insurer or TPA cannot pass along to employers requesting accommodation, directly or indirectly,

the cost of providing the contraception benefits. Insurers must segregate premium revenue collected from the objecting employer from the monies used to pay for contraceptives supplied to the plan’s female enrollees. Lockton comment: An insurer may claim an offset against the user fees it pays to offer products in the federally facilitated public health insurance exchange (think in an amount equal to the cost of providing the contraception benefits. TPAs, which don’t offer products in the exchanges, must find an insurer that does and ask it to submit a request for an offset of exchange user fees on behalf of the TPA. When the insurer receives the offset, it must promptly forward the money to the TPA. Both insurers and TPAs must keep records of these transactions for 10 years. Additional Modifications to the Accommodation Process Might Be Forthcoming Six federal circuit courts of appeal have upheld the accommodation process after considering arguments that the accommodation itself is a substantial restriction on an objecting employer’s religious beliefs. Employers challenging the accommodation have argued that the process violates their religious beliefs by coercing them to cause another party (an insurer or TPA) to do something (provide contraceptives) that the objecting employer finds reprehensible. One circuit court of appeals (the Eighth Circuit, with jurisdiction over several midwestern states) has sided with the objecting employers, and concluded that the government can and must find an accommodation process that is less restrictive to the religious rights of objecting employers. In a recent opinion, the court suggested alternatives to the current process, including a less descriptive notice that would merely voice the employer’s objection. The government could then independently identify and notify the employer’s insurer or TPA, which would then provide the objected-to contraceptives. Two additional alternatives were suggested: ❖ The government could provide the contracep-

tives itself through individual insurance policies in exchanges or directly through health centers, clinics and hospitals.

❖ The government could offer some combination

of subsidies, reimbursements, tax credits or tax deductions to women not otherwise able to obtain contraceptives through an employerprovided health plan.

In light of the differing opinions at the circuit court of appeals level, the Supreme Court has agreed to review the validity of the current accommodation process. Arguments before the court are set for March 2016, and a decision is expected no later than June 2016.

Brad Owens

Lockton’s Memphis Office 901 757 6901


Trends In Eliminating Or Changing Performance Appraisals By ANNE T. MCKNIGHT


Meeting with employees on a more frequent basis can also facilitate management’s ability to give more specific feedback as opposed to making general, vague statements about the employee’s performance at the end of the year. Addressing problems in bite-sized pieces over time seems to be an easier message to deliver than waiting until an arbitrary time to discuss a year’s worth of bad performance concerns. The more specific the feedback an employee receives, the better equipped the employee will be to fix issues and the more effective the manager will be in evaluating improvement.

Avoiding the Tendency to Stereotype Many of the above errors with annual performance reviews occur due to stereotyping of some kind by a supervisor. Stereotyping is not always negative but rather can also occur due to bias such as favoritism. To avoid stereotyping, a manager should keep a clear, open mind, stick to the facts, and focus on the employee’s actual performance. This is easier to accomplish when those facts are fresh in the manager’s mind.

istorically, employers have primarily relied on annual performance reviews to help address the strengths and weaknesses of their employees’ performance and to ultimately optimize productivity and overall job satisfaction. However, many companies have found these annual events to be ineffective and counterproductive forces in the workplace, especially when they are not properly conducted. An employer who fails to appropriately evaluate its employees may face practical, not to mention legal, pitfalls. Consequently, there seems to be a trend developing among many employers of eliminating annual performance reviews altogether, and instead relying on more continuous feedback throughout the year.

The halo/horn effect is one type of stereotyping that refers to the tendency to over or underrate a favored or less favored employee. This effect may also occur when a manager gives an employee the same rating as the employee’s previous performance review simply based on bias from the prior year’s performance, or based on the employee’s demeanor or a shared interest. A supervisor must remain objective by focusing on differences rather than similarities and by looking at each performance factor. Just because an employee performs poorly or, on the other hand, outstanding in one area does not mean the employee’s performance will be the same across the board. Focusing on specific instances can help an evaluating manager avoid this mistake.

The Washington Post recently reported that studies have shown up to 10% of Fortune 500 employers have eliminated the annual performance review process, and that many more are likely to follow. The theory is that ongoing feedback on a quarterly, monthly or even weekly basis is proving to be more effective. Expedia, Gap, Microsoft, Deloitte, and Medtronic are just a few examples of companies who have remodeled the way in which they give employees feedback and evaluate their work.

Recency error occurs when a supervisor lets recent events or performance, whether outstanding or unsatisfactory, closely preceding the review counterbalance an entire year’s worth of performance. For example, an employee who does a stellar job the week before the review meeting can offset mediocre performance over the prior months. Meeting on a more frequent basis helps counteract this type as the manager is better able to address good or bad performance as it occurs.

So Why the Shift? Problems with the Old Way Employers face a variety of challenges when it comes to carrying out the typical annual performance review process. Many of these challenges are simply due to the fact that the review generally occurs just once a year. Performance reviews are helpful only if they are honest, consistent and welldocumented. If an employee with chronic performance problems receives satisfactory performance reviews once each year or if the employer fails to otherwise document the employee’s ongoing performance problems, the employer may have a difficult time defending a subsequent disciplinary action. Further, if that employee is terminated by the employer for poor performance, the positive performance review will be the primary exhibit in the employee’s charge of discrimination or retaliation. Having regular reviews or conversations on a more frequent basis may help an employer address relevant issues on a consistent basis as they arise instead of sweeping them under the rug at the end of the year review. It is also problematic to tell an employee one thing, but then document something else. Employees expect a straightforward assessment of their performance and being dishonest with the employee will lead to misunderstandings or worse later. Further, if a manager tells an employee that she has nothing to worry about, despite a bad written review, it greatly undermines the ability of the written appraisal to support any negative action the employer may take as to the employee in the future. When employers have the opportunity to address shortcomings with employees on a more frequent basis, the employee has more opportunities to understand and correct them. 16

The cookie cutter effect occurs when a supervisor does not focus on individual specific performance and rates all employees, or groups of employees the same. This can occur in a team setting when a manager ranks an employee’s performance relatively high or low, based on an entire group’s performance, when the employee may have been a high contributor or low contributor to the overall success. To avoid the cookie cutter effect, a manager should assign individual ratings based on individual job performance. Again, this is easier to accomplish when each individual’s performance is fresh on the manager’s mind. Employers who are eliminating or modifying performance review processes are motivated to do so not only to avoid the problems mentioned above, but also in an effort to develop their employees faster and to accommodate the ever-changing nature of the work to be performed. What is applicable and relevant in January may be much different than what is needed in December. Employers are continuing to look for ways to stay more in-tune with their workforce in order to meet those evolving needs and goals.

Anne T. McKnight, Senior Associate Wimberly Lawson Wright Daves & Jones, PLLC Nashville, Tennessee Office

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A LITTLER EVENT Thursday, April 21, 2016 Background Checks and Pre-Employment Tests: Sound Hiring Practices to Protect Your Business Presented by:

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Breakfast Program:

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2015 MERCER Employer Benefits Survey • Mercer survey finds average total health benefit cost per employee rose 3.8% in 2015, following a 3.9% increase in 2014 • 2016 costs predicted to rise by 4.3% after employers make changes to plans According to the National Survey of EmployerSponsored Health Plans, conducted annually by Mercer (with 2,486 participants in 2015), total health benefits cost averaged $11,635 per employee in 2015. This cost includes both employer and employee contributions for medical, dental and other health coverage, for all covered employees and dependents. Small employers were hit with higher increases than large employers. Cost rose by 5.9% on average among employers with 10-499 employees but by just 2.9% among those with 500 or more. Employers predict that in 2016 their health benefits cost per employee will rise by 4.3% on average. This increase reflects changes they will make to reduce cost; if they made no changes to their current plans, they estimate that cost would rise by an average of 6.3%. But about half of all employers indicated that they would make changes in 2016. “Employers are moving on several fronts to hold down health cost growth,” said Julio A. Portalatin, President and CEO of Mercer. “In the best scenarios, they’re addressing workforce health, restructuring provider reimbursement to reward value, and putting the consumer front and center by providing more options and more support. Helping to hold down cost growth for large employers was a jump in enrollment in highdeductible consumer-driven health plans (CDHP) as they continued to implement new plans in 2015. Among small employers, use of these plans has grown more slowly. Where enrollment has nearly doubled among large employers over the past three years – from 15% to 28% of covered employees – among small employers it has risen from 17% to just 19%. Overall, CDHP enrollment reached 25% in 2015. 18

Turning the corner on consumerism High-deductible consumer-directed health plans remain a key tactic for minimizing excise tax exposure. Fully one-fourth of all covered employees are now enrolled in CDHPs, which include an employee account – either health savings account (HSA), the most common type, or a health reimbursement account. The largest employers have moved the fastest to add CDHPs – 73% of employers with 20,000 or more employees now offer a CDHP, and 30% of their covered employees are enrolled. Most of the growth in enrollment is the result of employers adding plans. Because most employers offer a CDHP alongside other medical plan choices, building CDHP enrollment over time is an ongoing challenge. An HSA-eligible CDHP costs about 18% less, on average, than a traditional PPO, and it’s typically the lowest-cost option for employees in terms of their paycheck deduction. However, when they are offered as an option, even among large employers that have offered the plan for at least three years only 29% of employees, on average, elect to enroll. “Employers have learned that the higher deductible can be a real deterrent for employees without enough savings to comfortably handle a major medical expense,” said Ms. Watts. “When CDHPs were first introduced, the concept made intuitive sense but we didn’t have the tools we have now to help employees actually become better health care consumers. I think we’re finally turning the corner.” A key difference is that more consumers now have real, and financially substantive, “shopping” choices. “You can pay $40 for a telemedicine visit, $70 to stop in at a retail clinic, or $125 for an office visit,” said Ms. Watts. Employers are moving quickly to implement telemedicine services – telephonic or video access to providers – as a low-cost, convenient

alternative to an office visit for some types of non-acute care. Offerings of telemedicine services jumped from 18% to 30% of all large employers. The ability to compare prices for higher-cost services is becoming a reality as well. More large employers contracted with a specialty vendor to provide their employees with a “transparency tool” – an online resource to help them compare provider price and quality (among employers with 20,000 or more employees, 24% provided transparency tools in 2015, up from just 15% in 2014). When employees can comparison shop, employers can give incentives to avoid the most expensive providers – in turn giving those providers a reason to adjust their prices. With “reference-based pricing,” for example, employers set a limit on how much they will cover for a specific service in a specific area, and the patient is responsible for the cost above that amount. Use of reference-based pricing rose from 11% to 13% among large employers in 2015. Employers are also getting more creative in how they support workforce health – the most desirable route to long-term cost management. About one-fourth of large employers (24%) encourage employees to track their physical activity with a “wearable” device, while 30% use mobile apps designed to engage employees in caring for their health. They are broadening the focus of workforce health and wellness programs to include other elements of well-being, offering programs to address sleep disorders (39%, up from 32% in 2014), improve resiliency (42%), and provide help in managing finances (69%).

Sharp drop in small employers considering terminating their plans While Mercer’s surveys have consistently shown that large employers remain committed to offering health coverage, in the early days of the health reform debate sizable numbers of small employers thought it was likely that they

would drop their plans and send employees to the public exchange. In 2013, 21% of employers with 50-499 employees said they were likely to drop their plans within the next five years; this number fell to 15% in 2014 and to just 7% in 2015. Among employers with 500 or more employees, just 5% say they are likely to drop their plans, essentially unchanged from 4% in 2014. “Employers know that health benefits really influence how employees feel about where they work,” said Beth Umland, Mercer’s director of research for health and benefits. “They want to continue to offer coverage, and with cost growth holding below 4% they’re gaining confidence that they’ll be able to afford it.”

Other findings •  PRIVATE EXCHANGES are gaining momentum fast: 6% of large employers already use a private exchange for active employees or will for open enrollment later this year, a 50% increase in just one year. Significantly, an additional 27% of large employers are considering switching to an exchange within five years. • EGG FREEZING is covered by 5% of all large employers (11% of those in the

Northeast). In vitro fertilization is covered by 24%; this number has remained essentially the same over the past 15 years. • GENDER REASSIGNMENT SURGERY is covered by 11% of all large employers (up from 8% in 2014) and by 29% of employers with 20,000 or more employees (up from 25%). • TOBACCO-USE SURCHARGES 29% of large employers (up from 26% in 2014) vary the employee contribution amount based on tobacco-use status or provide other incentives to encourage employees not to use tobacco. Among those reducing the premium for non-tobacco use, the median reduction is $400. The majority of employers (59%) include e-cigarettes in their definition of tobacco. • DOMESTIC PARTNER COVERAGE There was a big jump in the prevalence of employers that include same-sex domestic partners as eligible dependents, from 55% to 64% of all employers, and from 76% to 81% of jumbo employers. While there was growth nationally, there is still significant regional variation, from 80% of all employers in the West to 47% in the South.

• SPOUSAL SURCHARGES AND EXCLUSIONS There was no growth among large employers in the use of provisions excluding spouses with other coverage available (8%), but the use of spousal surcharges rose from 9% to 12% of all large employers. Among jumbo employers, 26% require a surcharge, essentially unchanged from 2014. The median surcharge is $100 monthly.

Survey methodology The Mercer National Survey of EmployerSponsored Health Plans is conducted using a national probability sample of public and private employers with at least 10 employees; 2,486 employers completed the survey in 2015. The survey was conducted during the late summer, when most employers have a good fix on their costs for the current year. Results represent about 600,000 employers and nearly 100 million full- and part-time employees. The error range is +/–3%. The full report on the Mercer survey, including a separate appendix of tables of responses broken out by employer size, region and industry, will be published in April 2016. For more information, visit ushealthplansurvey.

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DOL-Proposed Changes To Overtime Regulations –

The Waiting Game By LAURA K. CLAYMAN

The DOL expects the changes to convert 4.6 million eligible workers to non-exempt status and cost employers $1.18 to $1.27 billion per year in increased wages, plus $239-$255.3 million per year to become familiar with and adjust to the new rules.

How can we prepare now? In November, the DOL indicated that the earliest the final rules will be released is July 2016. Unfortunately, this late release may mean a short implementation period. There are several ways that an employer can start to prepare now for the eventual changes. First, an employer should identify any currently exempt jobs with salaries that fall below the proposed new salary threshold for exempt employees. Second, in order to make informed decisions about those employees, an employer must accurately determine the actual amount of hours those employees regularly work per week.

The Department of Labor’s (DOL) proposed changes to the overtime regulations were a long time coming. On March 13, 2014, President Obama directed the DOL to update the regulations defining which white collar workers are exempt from the overtime provisions of the Fair Labor Standards Act (FLSA). Employers anxiously awaited the release of the proposed changes…and waited…and waited. Sixteen months later, on July 6, 2015, the DOL released nearly 100 pages of proposed regulations and provided only a 60-day window for comments. That window closed with a loud thud on September 4, 2015. Now, we are again forced to wait and see if the DOL will revise its proposed changes in response to the protests against the drastic revisions.

Why the proposed changes? In the words of the DOL, at this time “a convenience store manager, fast food assistant manager, or some office workers may be expected to work 50 or 60 hours a week or more, making less than the poverty level for a family of four, and not receive a dime of overtime pay.” The regulations have not been updated in more than 10 years and the salary requirements have not kept up with the rising cost of living.

What are the proposed changes? The FLSA requires that all “non-exempt” employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. An employer uses the FLSA exemption tests to determine whether an employee is classified as “exempt” or “non-exempt.” These tests generally consist of “duties” tests, such as executive, administrative or professional (also known as the white collar exemptions). In order to be considered exempt, employees must not only pass one of the duties tests, they must also be paid on a salaried basis. The current weekly salary threshold is at least $455 or $23,600 per year (with few exceptions). Highly compensated employees must currently be paid total compensation of $100,000 or more and performing office or non-manual work to be considered exempt. The proposed DOL changes would increase the current minimum salary level of $455 per week ($23,660 per year) to $921 per week or ($47,892 per year). The proposed new salary level represents the 40th percentile of wages earned by workers across the United States in 2013. If implemented, the proposed rule will automatically update minimum salary level requirements for the white collar exemptions every year. Implementing automatic annual updates would prevent salary level requirements from lagging behind current wage payment trends. Projected data for 2016 would increase the salary threshold to $970 per week and $50,440 per year. The proposed rule would also increase the $100,000 salary level for highly compensated individuals to $122,148 per year – the 90th percentile of wages earned by workers in 2013. *This annual amount will also be automatically updated for 2016. 20

The results of the above analysis will help an employer decide whether to bump up those employees with salaries close to the new threshold to a higher pay rate to maintain exempt status or reclassify those employees as non-exempt. If an employee regularly works long hours, and overtime is the standard rather than the exception, an employer should consider increasing an employee’s salary to the new threshold level. If an employee does not regularly work more than 40 hours per week, a reclassification will make more sense than a salary increase. It will be important for an employer to compare expected results to actual hours worked and adjust the strategy if necessary. In some situations, employers may want to hire more part-time or seasonal employees to offset the amount of overtime needed to maintain production and service.

What to watch out for? Employers need to be aware that reclassification of exempt employees to non-exempt comes with the price of morale. Employees often feel like the reclassification is a demotion. Being a salaried exempt employee often comes with workplace flexibility. Morale issues will arise when a previously exempt employee now must clock out at lunch. These morale problems should be addressed in a strong, well thought out communications strategy. By educating the employees of the reasons for the changes, an employer can mitigate some of the emotional impact. It is important to point out to employees that in many cases, overtime pay will boost employees’ take-home pay. It is possible that the DOL will listen to the outpouring of protests and back down from the drastic salary threshold increase; however, it’s safe to say a change is coming. And until we know more, employers should prepare as best they can…and continue to wait.

Laura K. Clayman, J.D. Client Resource Team Senior Advisor Certified PPACA Professional Regions Insurance, Inc.

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Finding More Questions than Answers? When it comes to managing your employee benefits program and the Affordable Care Act, it can seem like every answer only leads you to more questions. Let Regions Insurance’s ACA-trained professionals guide you down the right path – because it’s our business to run defense for your business. Tom Hayes

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How To Prepare For The New EE0-1 Pay Data Requirements By THOMAS L. HENDERSON

On January 29, 2016, the EEOC issued a Notice of Proposed Rulemaking (NPRM). Under that proposed rule, federal contractors and private employers who employ 100 or more employees would be required to report specified pay data by sex, race, and ethnicity on their EEO-1 reports. If finalized, the rule will go into effect in September 2017. This article outlines the proposed new requirements, alerts HR professionals to legal issues presented by the proposed regulation, and provides steps to be taken now to ensure compliance. Under the NPRM, employers will have to collect data on pay and hours worked by employees, and report that data annually on their EE0-1 report. The information must be reported by job category and placed into one of twelve bands based on the amounts earned. The amount of pay is determined by the W-2 wages paid to the employee. It is to be calculated based on aggregate pay over a twelvemonth period from July 1 to September 30. The specific pay period is to be selected by the employer. The total number of hours worked by job category must also be reported. The same calculation used to determine wages is used to ascertain the annual hours worked. For non-exempt employees this should be relatively easy to report. However, with respect to exempt employees, the EEOC recognizes that records of hours worked are generally not available. Thus, the Commission is seeking input from stakeholders about how to calculate hours worked by exempt employees. One idea suggested by the EEOC is to use a figure of 40 hours per week for each exempt employee. How is this new data going to be used by the EEOC and OFCCP? The Commission states that the data will be employed as an “enforcement tool.” The EEOC will analyze the information to identify discriminatory pay practices and to combat pay discrimination. In other words, the information provided will be a precursor to potential litigation from the EEOC. According to the Commission, this new regulation is necessary because it is difficult for workers to remedy wage disparities if they cannot find out that they are being paid less. Also, the EEOC alleges that workers may face retaliation for inquiring about wages. The regulation has substantial impact beyond the EEO-1 report. Since EEO-1 information (at least the factual part) is generally available in private discrimination lawsuits, we expect to see a rise in individual and class actions. Instead of having to obtain the raw data and hire experts to analyze that data, a plaintiff can now simply use the information already compiled by the defendant-employer to show disparities in pay and hours worked. For example, under the Equal Pay Act (EPA), an employer cannot discriminate in pay on the basis of sex. If male and female employees “perform equal work on jobs, the performance of which requires equal skill, effort and responsibility, under 22

similar working conditions in the establishment,” they are to be paid the same. While there are exceptions, including differentials based on any factor other than sex, a private plaintiff will be able to use the new information to prove that others of the opposite sex were paid more, or worked more hours, and that, at least as far as job categories, they were performing similar jobs. Similarly, in a race or ethnicity lawsuit under Title VII, a plaintiff can use the data to prove that he was paid less than similarly situated individuals of different races or ethnicity. While the employee must still satisfy the remaining elements of the McDonnell Douglas analysis, this information certainly gives a plaintiff a head start on the wage claim. What can be done now to prepare for the new requirements? First, if you or your employer has comments in response to the NPRM, they are due on April 1, 2016. Second, this would be a good time to audit pay policies and procedures, along with an analysis of current employee pay. Consider having these done under the direction of your company’s legal department or outside counsel to guarantee the protection of the attorney-client privilege. On the audit of current pay, a comparison of those with the same job title is not sufficient. Instead, for EPA compliance, the applicable comparison is between those who perform equal work on jobs the performance of which requires equal skill, effort and responsibility, under similar working conditions. For Title VII race or ethnicity claims, the comparison is between those who are similarly situated. Determining the proper comparison groups will take some thought and input from several departments. If disparities are found, the reasons for those disparities must be determined. Often, they are easily explained by a seniority system or a merit system. They may be justified by employees receiving higher raises based on superior performance reviews. So long as it can be shown that the basis for the disparity is any factor other than sex, the EPA requirements are satisfied. For the audit of pay policies and procedures, special attention should be paid to the company’s written guidelines for determining starting pay, raises, and bonuses. To the extent possible, it is best to use objective factors in making those decisions. Whatever factors are considered should be spelled out completely and clearly. Ensuring that these factors are adhered to by each decision-maker should be part of the audit. Finally, proper records must be created and maintained showing the reasons for the starting pay provided to employees and all changes to that pay. Step increases should be recorded. If an employee receives a bonus or additional pay for outstanding work, that should be documented also. Performance issues resulting in lesser pay increases than others should be addressed and noted. It is almost certain that this regulation will become effective for 2017. By preparing now, pay issues can be addressed and resolved prior to the first required report.

Thomas L. Henderson, Managing Shareholder Ogletree Deakins Memphis Office

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 to receive updates on recent developments in labor and employment law. | 901.767.6160

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MONEY TALKS: How Employers Are Missing Out on the Psychology Behind Employee Pay By CLIFFORD STEPHAN

How much are you worth? More importantly, do you think it’s fair? If you can answer that question confidently, you’d be in the minority. A recent study by PayScale, reported in the Harvard Business Review, found that many employees are not sure about whether they’re being paid fairly. In fact, nearly two-thirds of the employees surveyed thought that they were underpaid, even though they were being paid a fair market rate! This is a revealing look into employee psychology. Does pay matter? Absolutely. In fact, my work as a compensation consultant is all about making sure companies know the competitive market place and have a plan for making informed decisions about employee pay. If pay is out of alignment with the market, or if a company doesn’t have a strong pay methodology, they run some big risks—high turnover, low employee morale, and even worse, potential liability for employee lawsuits. Setting the groundwork for a compensation plan that matches up with a company’s goals is a great way to make sure that employees stick around and are satisfied. So, the facts about employee pay and competitive market rates make sense. But while the number on the paycheck matters, so does the way that people think about their pay. And that can be a lot more difficult to determine. What an employee thinks about their pay has a big impact on their willingness to stay (or go). As an article from the World at Work Journal said in 2013, those “who believe [my emphasis] they are fairly paid are more engaged, are less likely to quit, experience less stress at work, feel healthier physically and psychologically, and are more satisfied with their personal life.” In other words, while a compensation program can be objectively tied to the market, the reality may still not match up with perceptions of fairness. No matter what the facts are, belief is key! So here’s the question: is it possible for employers to influence employees’ thoughts about pay? Or will employees just “believe what they believe”? While there’s no “easy button” when it comes to shaping people’s thoughts and attitudes, employers have a lot of power to shape how their employees feel about their pay. No matter what, employers can talk about pay in a transparent way. More than that, employers should be talking about pay if they want to get a leg up on employee attitudes and morale. For one, it’s no longer taboo to talk about it. Millennials—which are now officially the largest demographic in the workforce—are more likely to have open conversations about pay. They aren’t afraid to ask, and now more than ever, employers have to make it a priority. So if you’re an employer or in HR, there are two ways that you can deal with the psychology behind pay: you can either play defense, or you can play offense. If you’re not proactive about discussing pay with your employees, you’re playing defense. I’ve seen clients using this “non-strategy” time and again. For one, defensive employers don’t have a clear compensation plan. They don’t have a well-defined pay methodology. They may not know how each job position compares to market averages. And they may not have a good strategy for matching roles, responsibilities, and contribution levels with pay, bonuses, and other incentives. Without a clear compensation plan, you won’t have good answers for employees who (rightfully) ask about pay. More importantly, you can’t effectively deal with negative beliefs about pay. Playing offense means being transparent with employees about their pay and being proactive about those conversations. Sure, it takes some effort and planning to determine your position 24

relative to the market and your strategy with pay and rewards. But doing that work up-front is essential for employee engagement and satisfaction. With a clear understanding of the market and your compensation strategy, you’ll be in a much better position to discuss pay with your employees openly and honestly. Plus, you’ll be inline with the trends toward transparent conversations about pay. And get this: even if you aren’t paying top dollar for your talent, you still can have a big impact in how your employees feel about that! The same Harvard Business Review article mentioned, “transparent conversations about money can actually mitigate [their emphasis] low pay. So, if an employer pays lower than the market average for a position, but communicates clearly about the reasons for the smaller paycheck, 82% of employees…still felt satisfied with their work.” Eight-two percent still satisfied? Even with lower pay? Incredible…and also a really powerful example of how belief shapes attitudes about work. Playing offense with your employees means being able and willing to talk to employees about pay and job levels, market rates, perks, and benefits. It’s a simple strategy, but that may bridge the difference between your pay and what your competition pays. If you’re confident about discussing these issues with employees, then you’re in a much better position to attract and retain your talent. Knowing the market, having a plan for pay, and engaging your employees about pay will go a long way in building trust, transparency, and a more engaged workforce.

Need a game plan for playing offense? Not a problem. It’s as easy as 1-2-3. 1. Know how your compensation plan matches up with the market and have a strong pay methodology. This means having clear job titles and families, as well as calibrating your pay plan to your talent needs. 2.  Prep for positive communication. Let your employees know that you've reviewed the competition and have worked out how your company targets pay within a total rewards strategy. 3. Emphasize total rewards and pay. Remember that what you offer is more than just a paycheck, but a range of other perks: bonuses, rewards, paths to promotion, education opportunities, and other programs that align with your company’s DNA. Highlighting the good stuff is a key strategy that shows your employees that you value them in other ways than just a paycheck.

Clifford Stephan, Principal One Compensation


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Academic Internships—

A Perspective From

Higher Education By KATHY TUBERVILLE

Internships for college students provide an excellent opportunity to apply classroom knowledge to real-world applications (True, 2012). Through engagement with professionals in the field and discipline-related work experience, students gain invaluable expertise for future career opportunities (CEIA, 2015). Given the increasing number of millennials in today’s workforce, internships also provide employers with a “semester-long” interview that can be invaluable in talent management strategies. Recent discussions on the interpretation of the Department of Labor “six-prong test” for unpaid internships have posed new challenges for both students and institutions of higher education. In some jurisdictions, the six-prong test has been replaced with an interpretation that emphasizes the question of the “primary beneficiary” in the internship relationship for unpaid interns. While the value of experience is very important for today’s students, there are other factors for employers to consider as well. The new interpretation may encourage some employers to explore unpaid internships as an option for expanding their talent and recruiting efforts. If you are considering developing an internship program for your organization with possible plans for the interns to be unpaid or what is now often referred to as an “academic internship”, please consider the following points prior to implementing your program. Academic Internship Considerations • The institution of record determines if a student can earn academic credit for an internship course. Best practices nationally (CEIA, 2015; NSEE, 2015) indicate that a well-developed internship description is the protocol for faculty review. This internship description should minimally identify what the intern will be doing in the internship, who they will report to at the facility, and the length of the internship period. Based on many issues, such as accreditation standards, there may be additional requirements for certain disciplines. • Due to the nature of academic credit, the student pays regular tuition for an internship course, just as if it were a traditional “classroom” course. Tuition fees in many institutions are higher during the summer months with often less available financial aid for students. • With academic credit approvals, the faculty members who approve the internship credit in advance are assuming that the duties and areas of learning will be carried out during the semester. They work with the student to develop learning objectives and assign an end –of-course assignment to document and demonstrate the learning during the internship. These objectives and assignments may also vary by discipline. In essence, the site supervisor becomes part of the teaching team for the student’s academic program. Thus, the substantive work assignments are important and should be implemented carefully. • Students have to complete a required set of hours, ranging from 140-160 normally for a three credit hour academic internship and the hours are to be documented for the grade to be finalized with the institution. These hours are based upon a comparison of hours spent in other academic courses. 26

• Many institutions allow a student to both be paid and earn academic credit so the term “academic internship” is somewhat misleading when used only to mean an “unpaid” internship. • Unpaid internships in some disciplines are often more difficult for talent recruiting—particularly in engineering, business, and technology-based internships. The more competitive the disciplines in general, the less attractive unpaid internships tend to be to top students. Student Realities In many schools today, students are faced with increasing tuition fees and “cost of education” increases. It is not uncommon for students to be forced to work to supplement their college expenses. When a student is working in an unpaid academic internship, they are both working for no pay AND paying additional college tuition. In addition, they may have to also work an additional weekend job in order to have the internship experience and cover their living and college expenses. Thus, this experience can cause issues for time management and study requirements for their overall coursework. As an additional reality for many is the growing issue of student loan debt. Since the recession of 2008, the nation’s student-debt has grown to approximately $1.3 trillion. At this all-time high, student loan debt was reported at averaging $35,000 individually in a 2015 survey (The Wall Street Journal, 2015). If students are using the student loans for college tuition fees, an unpaid internship may be adding to their overall debt load as well. What Is The Answer? The legal issue of “the primary beneficiary” is often difficult to effectively resolve during an internship as employers definitely benefit from the work of interns in most cases. Students certainly benefit from the professional work experience that helps them apply what they’ve learned in the classroom. The issue is to continue to build a model that also rewards students for valuable work contributions. If your organization is a non-profit organization with restricted budgets, consider developing a well-structured internship program that provides a strong learning experience with substantive work opportunities and professional development options for student interns. Work closely with institutions to understand their requirements for students and become an active partner with the institution’s internship program. For-profit companies should strongly consider paying interns or minimally providing stipends to cover the cost of course tuition fees in addition to the program recommendations above. Not only will you increase the attractiveness of your internship program, you will be benefitting potential future employees for possible retention. Internship hourly rates range from minimum wage to over $20 per hour based on an organization’s resources. At 150 work hours on average, pay for a semester internship at $10 per hour is approximately $1500. The amount of talent provided in exchange is usually well-worth the investment, both in work outcomes and strategic recruiting efforts. Internships are very valuable for all partners—students, employers, and higher education institutions. Maximizing the effectiveness of internship programs is in short, a “win-win” for all and a sound recruitment and retention practice. Building bridges with educational partners to help students succeed not only produces stronger future employees in today’s organizations but also strategically assists in developing a talent-rich community.

Dr. Kathy Tuberville, SPHR Department of Management, Director of Avron B. Fogelman Professional Development Center, Fogelman College of Business and Economics, University of Memphis,


Is Revenge a Dish Best Served Cold?:

EEOC Seeks Input on Proposed Enforcement Guidance on Retaliation and Related Issues By CINDY KOLB

I. Introduction The Equal Employment Opportunity Commission’s (EEOC) existing compliance manual on retaliation was issued in 1998. Since that time, the percentage of retaliation charges has roughly doubled. On February 11, 2016, the EEOC released its Fiscal Year 2015 Enforcement Data. Retaliation was the most common allegation made and appeared in 39,757 charges (44.5% of all charges received). Retaliation is often alleged together with discrimination based on a protected characteristic such as race, sex, age or disability. Lawyers know that even if an employer has a good defense to a discrimination charge, a retaliation charge is more difficult to defeat. The Enforcement Data confirms that the EEOC remains focused on retaliation claims. In fact, the EEOC has proposed a new enforcement guidance on retaliation and related issues under federal employment discrimination laws. The public input period on the draft guidance ended on February 24, 2016. The EEOC will now consider revisions to the guidance before finalizing it and replacing the 1998 compliance manual.

II. Proposed Enforcement Guidance The Proposed Enforcement Guidance on Retaliation and Related Issues (Guidance) explains that, “Retaliation occurs when an employer unlawfully takes action against an individual in punishment for exercising rights protected by any of the EEO laws. The EEO anti-retaliation provisions apply to ensure that individuals are free to raise complaints of potential EEO violations or engage in other EEO activity without retribution or punishment.” Employers must not retaliate against employees who engage in “protected activity.”

III. Elements of a Retaliation Claim The Guidance examines the three elements of a retaliation claim: (1) protected activity: “participation” in EEO activity or “opposition” by the individual to discrimination; (2) adverse action taken by the employer; and (3) causal connection between the protected activity and the adverse action. a. Protected Activity Protected activity is defined as participating in an EEO process (such as filing a charge or lawsuit; being a witness; or, filing an internal complaint) or as opposing an unlawful practice (such as telling the employer a practice violates EEO laws or refusing to follow a discriminatory order). Protected activity must occur prior to the employer’s alleged retaliatory adverse action. Participating in an EEO process is protected even if the underlying charge is not meritorious or was not timely filed. In other words, the charge of alleged discrimination may fail but participating in EEO activity (such as in bringing a charge or being a witness) is protected activity for which the employee cannot be retaliated against. The reason for this is that the United States Supreme Court has ruled that it is necessary to protect participation broadly in order to maintain unfettered access to the protections of discrimination laws. The EEOC also views “participation” more expansively than just filing a charge or a lawsuit and includes as participation internal EEO complaints to company management, human resources, or otherwise that are made within an employer’s internal complaint process before 28

a discrimination charge is actually filed. Therefore, employers should be mindful of taking an adverse employment action against an employee even if they have not participated in an EEOC charge or lawsuit if they have, in fact, made an internal EEO complaint. Does this mean that employers cannot discipline an employee who has made an internal EEO complaint or filed a charge or lawsuit in the past? Can an employee “immunize” him or herself from discipline by making such a complaint? The answer to both questions is no. The Guidance clearly states, “Employers remain free to discipline or terminate employees for a legitimate, non-discriminatory, and non-retaliatory reason, notwithstanding any prior protected activity.” Obviously, this can be a tricky situation. The Guidance advises that if a manager recommends an adverse employment action for an employee who has participated in a charge, lawsuit or internal EEO complaint that an independent evaluation (for example by HR, upper management or legal counsel) scrutinizing the legitimacy of the action be undertaken to ensure that it is consistent with the employer’s policies and equivalent to actions taken against similarly-situated employees. An individual is protected from retaliation for opposing any practice made unlawful under the EEO laws. However, in contrast to the protection offered for participating in an EEO complaint, opposition by an employee must be to practices that they reasonably believe are unlawful. There is no “exception” to this protection for managers. For example, a supervisor or human resource manager who opposes a discriminatory practice is protected from retaliation based on this opposition. But, once again, this does not give the employee license to neglect job duties. If an employee’s protests render the employee ineffective in the job, the retaliation provisions do not immunize the employee from appropriate discipline or discharge. b. Adverse Action  Most employers know that one of the elements an employee has to demonstrate in order to prove a claim of discrimination is that an adverse employment action was taken against the employee. However, when dealing with retaliation, the definition of “adverse action” is broader than in a discrimination claim. Retaliation expansively reaches any action that is “materially adverse,” meaning any action that might well deter a reasonable person from engaging in protected activity. A “materially adverse” action goes beyond the obvious termination or demotion and may include things such as lowered scores on performance reviews, taking away a supervisory role or even actions outside of the workplace, such as a threat to report the immigration status of an employee. c. Causal Connection A materially adverse action does not violate the EEO laws unless the employer took the action because the charging party engaged in protected activity. Where a retaliatory motive is not self-evident, and the employer instead identifies a lawful reason for the adverse action, the charging party will have to produce enough evidence to discredit the employer’s explanation and prove the real reason was retaliation. In private sector and state and

local government cases, the individual must show that “but for” a retaliatory motive, the employer would not have taken the adverse action. This standard does not require that retaliation be the “sole cause” of the adverse action, but does require a showing that the adverse action would not have occurred in the absence of a retaliatory motive. Such a showing can be made by different pieces of evidence that when put together are enough to demonstrate an inference of retaliatory intent. These pieces of evidence may include things such as suspicious timing, verbal or written statements, comparative evidence that a similarly situated employee was treated differently, falsity of the employer’s proffered reason for the adverse action, or any other “bits and pieces” from which an inference of retaliatory intent might be drawn.

IV. Best Practices What can an employer do to try to reduce the incidence of retaliation and stay in the good graces of the EEOC? The Guidance sets out some steps that may help reduce the risk of violations: a. Written Policies: Employers should have a written anti-retaliation policy that is easy to understand and provides examples of what to do and what not to do. It should set forth proactive steps for avoiding actual and perceived retaliation; include a reporting mechanism, including access to a mechanism for informal resolution; and a clear explanation that retaliation can subject one to discipline, up to and including termination. The policy should not include terms that make the employee fear retaliation, such as warning employees that reports of discrimination found to be false will subject the worker to disciplinary action. Other policies should be reviewed to ensure that there are not any that would deter employees from engaging in protected activity.  b.  Training: Train all managers, supervisors and employees on the employer’s written anti-retaliation policy and hold periodic refresher training. Tailor the training to problems that may have arisen in your particular workplace and provide examples of how to handle specific scenarios.

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 c.  Provide Anti-Retaliation Advice and Individualized Support: An automatic part of an employer’s response and investigation following EEO allegations should be to provide information to all parties and witnesses regarding the anti-retaliation policy, how to report alleged retaliation and how to avoid engaging in it. This should include tips for avoiding actual or perceived retaliation, as well as access to a resource individual for advice and counsel on managing the situation. d. Proactive Follow-Up: Employers may wish to check in with employees, managers and witnesses during the pendency of an EEO matter to inquire if there are any concerns regarding potential or perceived retaliation, and to provide guidance.  e.  Review Consequential Employment Actions to Ensure EEO Compliance: Employers should consider using a human resources or EEO specialist, legal counsel or other resource to review consequential employment actions involving protected employees to ensure any such decisions are based on legitimate, non-discriminatory, non-retaliatory reasons. The above summary of the proposed Guidance hopefully gives employers an overview of the EEOC’s continued focus on retaliation. Employers are encouraged to review the proposed Guidance, check their anti-retaliation policy and provide refresher training to all of their employees.

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What if You Suspect a Green Card is Fraudulent? By BRUCE E. BUCHANAN

The Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) issued two Technical Assistance Letters (TALs) in late December 2015 and early January 2016 providing guidance in the requested situations.

TAL – What to do When Employer Believes Green Card is Fraudulent In the January 8, 2016 TAL, OSC was asked how to advise a client following an internal audit of the client's I-9 forms. The attorney asked what steps the client should take concerning Permanent Resident Cards that the client doubts the veracity of. The anti-discrimination provision of the Immigration and Nationality Act ("INA") prohibits four types of employment-related conduct: (1) citizenship or immigration status discrimination in hiring, firing, or recruiting for a fee; (2) national origin discrimination in hiring, firing, or recruiting for a fee; (3) “document abuse"; and (4) retaliation for filing a charge, assisting in an investigation, or asserting rights under this provision. OSC issued a TAL on October 23, 2015 concerning a similar question on internal I-9 audits. Thereafter, on December 14, 2015, OSC and Immigration and Customs Enforcement (ICE) issued guidance to assist employers in conducting internal audits without violating the antidiscrimination provisions of the INA. Thus, in light of recently issued guidance, the January 8, 2016 TAL supersedes the October 23, 2015 TAL. As OSC explained, to prevent discrimination in violation of the antidiscrimination provision, an employer conducting an internal I-9 form audit should conduct the audit in a consistent manner, treating similarlysituated employees in a similar manner, and should not treat employees differently based on citizenship, immigration status, or national origin. Plus, employers should apply the same level of scrutiny to I-9 documentation and should not apply different levels of scrutiny based on citizenship, immigration status, or national origin. In answer to the question regarding Permanent Resident Cards that an employer doubts the veracity of, the OSC referred to the December 14, 2015 guidance. The guidance reminds employers that they "are required to accept original Form I-9 documentation that reasonably appears to be genuine and to relate to the individual presenting the documentation." However, in the context of an internal audit, an employer "should recognize that it may not be able to definitely determine the genuineness of I-9 form documentation based on photocopies of the documentation" and "[a]n employer may not conclude, without foundation, that a photocopy of an employee's I-9 form documentation is not genuine or does not relate to the individual." Furthermore, the guidance stated if an employer conducting an internal I-9 form audit concludes, based on a photocopy, that a document does not appear genuine or to reasonably relate to an individual, the employer "should address its concern with the employee and provide the employee with the opportunity to choose a different document to present from the Lists of Acceptable Documents." However, the employee also has the option to give the employer the originally presented document to resolve the 30

employer's concerns, and the employer is not prohibited from reviewing the original document and determining that it appears to be genuine and to reasonably relate to the employee. If after reviewing the originally presented document, an employer determines that it appears genuine and reasonably relates to the employee, then the employer must accept that document and not request additional documents. If the originally presented document is unavailable or if, after reviewing the original document, the employer concludes that it does not appear to be genuine or to reasonably relate to the individual, the employer should provide the employee with an opportunity to choose a different document(s) to present from the Lists of Acceptable Documents.

TAL – Terminating U.S. Workers and Replacing with Contract Workers on H-1Bs In the December 22, 2015 TAL, the OSC stated an employer violates the anti-discrimination provision of the INA by terminating U.S. workers because of their citizenship status and instead using contract workers with temporary work visas. Although it is clear that an employer cannot replace U.S. workers with temporary work visa workers – such as H-1B, H-2B, etc., due to the U.S. worker’s citizenship status, the requestor sought an opinion on whether the same standard applied if the replacements were contract workers. OSC stated the question of whether the anti-discrimination provision was violated through the use of contract workers depends on the facts, including: (1) whether there is evidence of intentional discrimination in the selection of employees for discharge or rehire, (2) the circumstances surrounding the selection of the third party staffing contractor, and (3) the extent to which the original employer could be considered a joint employer of the contract workers. OCS cited several recent settlements concerning unlawful employer preferences for temporary visa holders. A second question was raised as to whether disparate impact and/or discriminatory intent must be shown to prove a violation of the anti-discrimination provision of the INA. OSC answered that the statute states it must be “because of ” citizenship status; thus, only through intent can one prove a violation. OSC added intentional discrimination does not require animus or hostility toward the protected class workers.

Takeaways Even though OSC’s TALs do not carry the weight of an agency or court decision, they can be helpful in analyzing potential violations. As previously discussed, OSC has been increasing their enforcement efforts and penalties. Therefore, employers and their legal counsel would be wise to analyze these advice letters to determine possible future courses of action.

Bruce E. Buchanan, Attorney Siskind Susser PC

Post Employment Screening: Why You Should Screen and Monitor Existing Employees By SUSAN MCCULLAH

If employers screen applicants before hiring them, then their companies are secure from fraudulent acts involving their employees, right? The answer is NO. While it’s a smart practice to thoroughly screen job candidates in a pre-employment process to decrease the change of hiring unsafe, unqualified, or dangerous employees, the risk doesn’t end there. Unfortunately, over time, a good, honest person can change, become addicted, or fall into general unsavory actions that can end up increasing the risk to your workplace. This is why post-employment screening is fast becoming an integral part of the business landscape.

using drugs recreationally, which can spin out of control. The resulting impact can vary from poor work performance, to stealing, to on the job safety issues. 2: Financial issues. Especially in the roller coaster economy of the last few years, many Americans have fallen into dire financial situations. Underwater mortgages, high credit card debt, and spouses losing jobs are just some of the reasons why an employee may be feeling desperate. These stresses can cause changes in even the best employees, and tempt them into stealing from the company or committing other crimes. 3: Overall bad decisions. Let’s face it: some people make really stupid decisions that carry steep consequences. Some of these decisions are illegal. If an employee is in trouble with law enforcement, it is best to minimize the risk of the company by learning about it as soon as possible. Being aware of how negative any of these situations can be for a company’s bottom line is crucial in maintaining a safe and productive workplace. By using the following monitoring tools on current employees, a business can further reduce risk and improve the bottom line:

Businesses across the country are losing millions of dollars each year, lost productivity, and damage to their reputations because of employees who have had a negative change in lifestyle. Even if you performed a thorough background screen when you hired the person, this does not mean you will remain risk free as time passes.

A survey was conducted on six companies in the same industry, each with over 200 employees. The results showed that 3.5% of all employees checked who had started work with a clean record, had, since they were hired, been convicted of a criminal offense. These offenses ranged from robbery to drug related issues - all without the employer's knowledge. Here are 3 important reasons why current employees should be monitored periodically: 1: Addiction. It’s estimated that 7 out of 10 people who have drug and alcohol addictions are employed either full or part time. While many people begin using drugs in their teens, this is not always the case. Employees may begin

- Review their driving record. Order a Motor Vehicle Records Search periodically. This report generates from the DMV, and will reveal if the employee has had violations such as a DUI that could be problematic to your company. NOTE: Only utilize credit reports in this manner for positions in which knowledge of an employee’s credit habits are relevant and fair. Several states have restricted using credit reports in screening employees, depending on the position held. Speaking of compliance, there are a few considerations when implementing a background investigations on current employees, here are a couple of best practices to remember: • Utilize an Evergreen Applicant Release form. Ensure that the Applicant Release Form, which the applicant signs to authorize the initial background check, is “Evergreen”. Essentially, the form needs to contain a statement which clearly informs the applicant that by signing this form, they authorize the employer to order pre-employment background checks as well as annual and/ or random background checks in accordance with company policies throughout the term of employment, should the applicant be hired. Be sure to retain signed forms digitally as part of your program. • Clearly define the policy. Ensure that your policy of annual and/or random background checks is clearly defined within your organizations’ Employee Handbook and other new hire information documentation.

The reason is simple.

Take this story as an example:

uncover bad judgment as well as financial issues that could drive the employee to steal.

• Consistently apply the program. Ensure that your HR team consistently applies the program to all employees, and that clearly documented policies and penalties are enforced should an employee background check make such action necessary. - Periodic criminal checks. At a minimum, run a county criminal search in the county the employee lives, and a nationwide data base search. Do this once per year. - Screen for drug use. Drug addicted employees are more likely to miss work, be unproductive, and steal from their employees than their non abusing counterparts. There are a wide range of products that employer can put in action to identify drug abusing employees. Utilize drug testing, and have a program in place for offenders. - Check their credit. Periodically checking an employee’s credit report is one way to measure the person’s trustworthiness and decrease the risk of becoming a victim of fraud. This process can

Businesses need to realize that the screening of an employee is not complete on their first day of work. While a good pre-employment screening process helps to decrease the possibility of hiring unqualified, dishonest, or dangerous applicants, implementing a screening process for current employees can further guard against risk to the company and the workplace.

Susan McCullah Marketing Project Manager Data Facts, Inc.


Sanchez had logged into the plan administration software system and changed all of the addresses of the participants and beneficiaries to that of the company. He also changed the bank account to one that was solely controlled by him. Because of these changes, the TPA refused to distribute the assets of the terminated plan. Since the TPA refused, Mr. Sanchez requested that the TPA transfer all administrative duties associated with the plan to another company which was controlled by him. The TPA, once again, refused. Thus, Mr. Sanchez essentially walked away from all duties associated with the plan, leaving the plan participants and beneficiaries without access to their plan benefits. At that time, there were approximately seventy-six (76) participants in the plan with $1,383,875 in assets. The DOL subsequently brought suit after the EBSA investigation. On January 12, 2016, the judgment issued in the civil case barred the defendant from serving as a fiduciary or as an employee in any type of ERISA-governed employee benefit plan. Further, the order appointed, at the defendant’s expense, Receivership Management Inc. in Brentwood, Tennessee as an independent fiduciary to the plan to terminate the plan and distribute the asset to the plan’s participants.

When the DOL Sues Your Plan on Behalf of Your Participants, and WiNS By JENNIFER S. KIESEWETTER

Under the Employee Retirement Income Security Act of 1974 (ERISA), the Department of Labor (DOL or the Department) has standing to bring a civil action for appropriate relief for breach of fiduciary duty occurring in any ERISA-governed plan. If a fiduciary breaches his or her duties with respect to the plan, as governed by ERISA, that fiduciary shall: • be personally liable to the plan for any losses as a result of his or her breach; • must restore any profits to the plan which may have been used by the fiduciary due to such breach; • may be removed as a fiduciary to the plan; and • shall be subject to any other equitable or remedial relief as the court deems appropriate given the facts and circumstances. The DOL does not take breaches of fiduciary duty lightly. Given its ability to bring a civil lawsuit, the Department exercises such standing freely. We are not even through the first quarter of 2016, and the DOL has not only been active in the audit realm, as evidenced by the court cases below, but active in the court system as well. Below, are some filed lawsuits, and judgments, that the DOL has secured in 2016.

Ants Software Inc. 401k Plan, Judgment to Distribute $1.3M for Participants In February 2013, Ants Software Inc. in Dunwoody, Georgia ceased its operation and terminated its 401k plan. Rik Sanchez, the fiduciary on the plan, informed the plan’s third party administrator (TPA) that the plan was being terminated and that the assets would need to be distributed to the participants and beneficiaries. After an investigation by the enforcement arm of the DOL, the Employee Benefits Security Administration (EBSA), it was determined that Mr. 32

TSPA Holding Inc. 401k Profit Sharing Plan, Files Lawsuit to Recover $31K in Missing Plan Assets On January 8, 2016, the DOL filed a lawsuit against TSPA Holding Inc. in Austin, Texas and its owner to recover $31,000 in missing plan assets. The EBSA had previously investigated TSPA Holding Inc. and determined that the company and the owner failed to remit any of the participant contribution or the company matching contributions to the 401k accounts on behalf of the participants. The DOL now seeks a court order requiring the restoration of all plan losses and barring the company owner from serving as a fiduciary to this plan or any other employee benefit plan.

J.E. Keever Mortuary Inc.’s SIMPLE IRA Plan, Files Lawsuit to Recover $80K in Missing Plan Assets On January 15, 2016, the DOL filed a lawsuit against J.E. Keever Mortuary Inc. in Ennis, Texas and its owner to recover $80,000 in missing plan assets. Like TSPA Holding, the EBSA had previously investigated J.E. Keever Mortuary and determined that the company and the owner failed to remit employee contributions and mandatory company contributions to the company’s SIMPLE IRA plan accounts on behalf of the participants. The DOL now seeks a court order requiring restoration of all plan losses and barring the company owner from serving as a fiduciary to this plan or any other employee benefit plan.

Commodity Control Employee Stock Ownership Plan, Files Lawsuit to Recover Losses to ESOP due to Overvaluation of the Company Stock On January 20, 2016, the EBSA filed a lawsuit against Commodity Control Corporation, the owner (who also served as the trustee to the company’s ESOP), the estate of a former owner (and trustee to the ESOP), and the ESOP itself, claiming that the defendants acted with imprudence, disloyalty, contrary to plan documents, and engaged in prohibited transactions by causing the ESOP to purchase employer stock for greater than market value. The owners caused the ESOP to buy the full ownership interest in the company for $9.1 million, resulting in the ESOP owning one hundred percent (100%) of the company. The EBSA, as stated above, asserted that the ESOP overpaid for the stock. Further, the EBSA state that the defendant’s failed to obtain a current and accurate appraisal of the company stock, failed to ensure that the independent appraisal company had accurate company financials on which to base the appraisal, failed to review the appraisal reports, and failed to question the assumptions set forth in the appraisal reports. The EBSA is seeking a court order requiring the defendants to jointly and severally restore losses to the plan as a result of their fiduciary breaches. Further, the EBSA is seeking the order to require the owners (and owner’s estate) to disgorge any cash, payments, or proceeds that they received for any of the ESOP stock purchases and to permanently enjoin all defendants from serving as fiduciaries or service providers to any ERISA plans in the future.

National Production Workers Union Severance Trust Plan, Fiduciary Enjoined for Prohibited Transactions, All Plan Assets and Losses Repaid On January 22, 2016, the DOL and the defendants - the National Production Workers Union Severance Trust Plan (Severance Plan) and Anthony Monaco, the Plan Manager and fiduciary – received a Consent Judgment and Order from the federal court in the Northern District of Illinois. During an investigation by the EBSA, it was determined that the Severance Plan improperly paid administrative expenses for another one of the company’s plans over a three year period of time. Additionally, Monaco failed to locate missing participants to pay out their distributions. At least 10,192 participants were deemed “missing” with benefits totaling $13,600,000. Finally, Monaco failed to allow the Severance Plan to transfer plan assets to other individuals and to an affiliated 401(k) plan. The improper transfers totaled $6,248.00. As a result of the investigation and the subsequent litigation by the DOL, Monaco resigned from all fiduciary positions with the plan. All losses associated with the allegations were repaid to the plan and all distributions were made to the proper participants. Further, Monaco was enjoined from ever serving as a fiduciary or a service provider to any type of ERISA plan in the future.

Gruber Systems, Inc. Employee Stock Ownership Plan, Judgment for $1.1M for Participants On January 28, 2016, the Department of Labor received a Consent Judgment and Order after filing suit against Gruber Systems, Inc. with respect to breaches of fiduciary duties and violations of prohibited transactions involving the company’s employee stock ownership plan (ESOP). After an investigation was conducted by the EBSA, the DOL filed suit alleging that the defendants caused the company’s ESOP to purchase company stock for more than company value, which then resulted in losses to the ESOP participants. It was further alleged that the stock purchases were steered to help fund the financially stressed company. The judgment and order permanently enjoined all defendants from engaging in any other ERISA violations and permanently bars them from serving as a fiduciary or service provider in any type of ERISA plan in the future. The company and the CEO of the company have been ordered to return $1.1 million to the company’s ESOP for the losses incurred. Additionally, the order required the company and the CEO to pay $220,000 in civil monetary penalties and ordered newly-appointed plan trustees to distribute all money to the plan participants and beneficiaries and to terminate the plan.

International Association of Machinists Pension Plan, Files Lawsuit of Multiple Fiduciary Breaches Against Trustees On January 24, 2016, the DOL brought suit against the International Association of Machinists Pension Plan and its board of trustees after an investigation by the EBSA uncovered multiple violations of ERISA. For example, the trustees breached their fiduciary duties by: (1) failing to loyally and prudently select fund service providers; (2) creating conflicts of interest for the plan; (3) unlawfully soliciting and accepting gratuities from plan service providers; (4) regularly ignoring the requirements of the plan documents; and (5) spending plan assets on trips, parties, food, wine, and other luxuries. The lawsuit by the DOL is seeking a court order to require the defendants to restore all losses to the plan and require the plan to implement procedures so that the plan does not incur any future ERISA violations.

Jennifer S. Kiesewetter, Esq. Kiesewetter Law Firm, PLLC

Legal Challenges are Coming at HR Professionals from Every Direction

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is standard fare for reviewers to expound upon a book’s main points, structure, its value to the reader and backing it up with careful analysis. I certainly will do that here but rarely has this reviewer read a book that so quickly hits home. Reviving Work Ethic: A Leader’s Guide to Ending Entitlement and Restoring Pride in the Emerging Workforce by Eric Chester, unlocks the mystery of how to relate to and manage a younger workforce and does so with clarity, common sense, and humor! I thoroughly enjoyed this book and I will bet you will too. Take, for example, one of the beginning passages by the author: “They have grown up in a world where most people work hard to find ways of avoiding hard work. They’ve heard stories telling how lottery winners, day traders, bloggers, dot-commers, and Internet marketers have managed to beat the system and derive a huge bounty with little or no effort. They’ve been inundated with reality television that turn talentless fools into millionaires in the blink of an eye and with the greatest of ease. Is it any wonder there is a burgeoning entitlement mentality among the new workforce?” This opening really sums up what many of us ‘older’ workers feel about this new generation of employees. Very simply, Reviving Work Ethic nails it!

WHAT IS WORK ETHIC? Now what exactly is work ethic the reader may ask? First, let me provide a bit of research because this question often goes out in many directions. Our author provides a simple definition that “Work ethic is knowing what to do and doing it” while Websters states “The belief that work is morally good.” Yet Wikipedia defines it as “Work ethic is a value based on hard work and diligence.” Essentially each is correct and each hints at the morals and values our earliest philosophers proclaimed was needed for truly ethical behavior. The problem, as Chester explains, is that if he asked ten people that simple question he would likely receive ten different answers. What this author does however is bring it all together from the context of an employer’s expectations. Interestingly, as a professor of Business Ethics, I also have found this lack of consensus about what work ethic is among my younger students quite troublesome. There appears to be a genuine disconnect between cause and effect, between action and responsibility, between rights earned and the feeling of entitlement, and as the author relates, most significantly “with the differences between the values they were taught and the values they see on display around them.” This, Chester correctly identifies as cognitive dissonance; that uncomfortable feeling caused by holding conflicting ideas simultaneously.” And with regard to the concept of work ethic, what should be a similar understanding between older and younger is not. This misconception also transcends to the workplace where a younger workforce arrives with little or no understanding of what their employer expects of them in the way of morals and behavioral values. And to quote Chester, “Therefore, the burden of developing work ethic within the emerging workforce has shifted to employers.” Certainly, an uncomfortable truth, but a truth all the same. But to quote the author directly, “In the simplest of terms, employers expect employees to remember the values they learned as kids . . . whenever and wherever they learned them . . . and adhere to them in the workplace.” 34

Readers will appreciate Chester’s approach to not just bringing us all back to a simpler time when showing up to work on time, dressed appropriately and ready to work really did mean something, to how managers and employers can instill those same expectations right now. Reviving Work Ethic is based upon a very simple premise; that the values we all learned as children directly relate to what employers want today. Chester refers to these values as the seven Universal Sandbox Values; Smile and play nice, Be prompt, Look your best, Do your best, Obey the rules, Tell the truth, and Say please and thank you. These seven principles then directly correlate to the same values employers want, need, and expect; Positive attitude, Reliability, Professionalism, Initiative, Respect, Integrity, and Gratitude. The author then anchors each with conversation starters and tips for installing that behavioral value within any organization as well as providing a visual model for what is needed to instill these values.

HOW THIS BOOK CAN HELP It is relevant to add that Chester, who coined the phrase “Generation Why?” to the business world ten short years ago, definitely has his thumb on the pulse of young people entering the workforce today. He makes his case in simple, direct language readers will appreciate. He does not bog the message down with complex ethical theories but rather causes us to remember what good ethical behavior looks like and how it can be applied within the workplace. At the risk of giving away the plot, the first few chapters quickly draw you in by exposing what work ethic used to look like versus what it has suddenly become. The reader will immediately recognize the players and identify with them. Then Chester lays out common sense approaches for each of the seven principles worth repeating: Positive attitude, Reliability, Professionalism, Initiative, Respect, Integrity, and Gratitude. Principles every organization has and works hard to maintain. As a reviewer, I found it to be a quick, informative read but also as a manager of younger workers, I found it completely applicable and just in case you can’t tell, I like this book. Managers . . . take heed; you need to read this one. HR . . . this one will be a keeper. Corporate trainers . . . it will change how you approach training your new workforce. And business owners . . . you can’t afford not to invest the short time it takes to read, absorb and apply badly needed life lessons about a new generation of employees. Next month, I will review Chester’s latest work, On Fire at Work!

William Carmichael, Ed.D Campus Dean Strayer University

The Value of Employer Clinics March 17, 2016 Registration/Networking 9:15 a.m. Workshop 10:00 a.m. -2:00 p.m. LOCATION Holiday Inn at the University of Memphis Come hear the latest on why more employers are implementing on-site and near-site clinics and how these clinics are meeting the needs of public and private employers for innovative health care delivery and employee wellness solutions. Sessions will include mid-south employers sharing their experience and best practices as well as nationally recognized leaders in employersponsored clinics. This workshop is a must for employers interested in developing clinics; those looking to make existing clinics even more effective; and health care and clinic managers who want to design programs to better meet employer needs.

Hosted by HealthCare 21 Business Coalition, Memphis Business Group on Health, Mississippi Business Group on Health, and the National Association of Worksite Health Centers.

Coalition members attend free so enter your promotional code when registering. To Register click here!

A collaborative learning opportunity for the coalition members and employers in the Mid South.


Preventing employment discrimination from occurring in the workplace is preferable to trying to deal with the consequences of discrimination. The U. S. Equal Employment Opportunity Commission (EEOC) is committed to providing training and technical assistance, outreach and educational programs to assist employers and other stakeholder groups understand and prevent discrimination. Debra Finney is the Outreach & Education Manager for the EEOC’s Memphis District Office (Arkansas, Tennessee and North Mississippi). In that position, she is the person responsible for providing training and technical assistance, outreach and educational programs for stakeholders in her district. Since 2004, Ms. Finney has traveled the district, and country, conducting presentations and trainings for employer groups and other stakeholders. Frequently, EEOC representatives are available to make presentations and participate in meetings with employers, employees and their representative groups. Additionally, EEOC, through the EEOC Training Institute, provides a variety of fee based training programs. EEOC provides customized training, designed to meet particular needs, that is delivered on-site. Ms. Finney frequently works with employers across the district to provide training to their managers or supervisors and employees. The most requested training is Workplace Harassment, followed by sessions on the ADA. One popular session for managers and supervisors is the EEO101 for Managers and Supervisors. It provides a good basic background of EEO law for managers and supervisors and defines the areas of workplace harassment, accommodation for disability or religion, retaliation and more. In the Memphis District, there are two seminars held annually for employers. Human resource 36

professionals, business owners, managers, supervisors, state and local government officials, federal agency EEO staff, employment agency staff, union officials, attorneys and others will obtain useful information and guidance at these seminars.

You do not have to attend an EEOC sponsored seminar to hear from the EEOC. Ms. Finney, or another EEOC representative, will come speak to your group on any EEOC related topic. Some of the more popular topics are:

These Technical Assistance Seminars highlight the latest changes to EEO laws and regulations. They provide attendees with best practices and allow them to gain valuable knowledge to prepare for those tough HR decisions. The seminars provide participants with information on the latest changes to EEO laws and provide tips on preventing discrimination in the workplace.

• A Culture of Respect in the Workplace

For 2016, the Memphis District will have these seminars in Little Rock, AR (June 22) and Nashville, TN (August 30). These highly rated seminars usually sell out in the Memphis District. Many attendees have been coming for several years. The seminars include workshops on the latest hot topics and a Legal Update on significant cases that can impact your organization. This year the topics that will be covered include; Retaliation, ADA101: Basics for New Managers or Supervisors, Micro-Aggressions and Micro-Inequities: Little Things Can Create Big Problems, Legal Update, What’s New @ EEOC (to include information on the new ACT Digital Charge Processing System) and more. Each participant receives a participant handbook of materials for each session and a comprehensive 8 volume CD ROM Resource Guide. The EEOC is a pre-approved provider for HRCI and SHRM and offers continuing education credits for these seminars. The cost of registration includes all of the above plus a luncheon and morning and afternoon breaks.

• Conducting an Internal Harassment Investigation

Another employer geared conference is the EXCEL Conference (Examining Conflict in Employment Law). This conference, held annually in the late summer, is sponsored by the EEOCs Training Institute. In its 19th year, EXCEL is the premier national training conference for federal and private sector EEO managers, supervisors, practitioners, HR professionals, attorneys and ADR specialists. The employer community, both the private and public sector, will gain invaluable knowledge for making those tough HR decisions! The EXCEL Conference features the latest EEO developments from the EEOC experts who enforce EEO laws and from other federal high ranking officials about their agencies' priorities and regulatory agenda. EXCEL offers: • Plenary sessions featuring the EEOC Chair Jenny Yang, and other high ranking agency officials, leaders of other federal agencies, and nationally renowned civil rights leaders and speakers • Over 70 Workshops Continuing education credits with HRCI and SHRM are obtained for most sessions at EXCEL. More information is available about EXCEL at

• ADA Reasonable Accommodation • Are You Really an EEO Employer? From the Theoretical to the Practical • The Big Payback Can Lead to the Big Pay Out: Retaliation

• EEOC Overview • Faith@Work: Managing Religious Diversity at Work • Labor Pains? Examining Pregnancy Discrimination in the Workplace • Legal Framework for Discrimination Coverage of LGBT Individuals • Social Media in the Workplace: Can Facebook Friends become Workplace Enemies? • Strategic Enforcement Plan: A Roadmap of EEOC Priorities • Three Headed Monster: ADA/FMLA/Workers’ Comp • What’s New @ EEOC • Workplace Harassment Ms. Finney has spoken to numerous employer groups throughout Arkansas, Mississippi and Tennessee. The benefit of having her speak at a monthly meeting is two –fold; you gain up-todate information from EEOC and you meet and develop a relationship with the EEOC representative. She has been speaking to some SHRM groups in her district regularly for over 10 years. Many of the presentations have been approved for HRCI or SHRM credit already. The EEOC is also available to speak at SHRM state and legislative conferences. Ms. Finney is also the Small Business Liaison for the Memphis District Office and she is available to assist small business employers with any questions or concerns they may have. This resource for employers is invaluable. Ms. Finney has assisted many employers, small and otherwise, with questions about Workplace Anti-Harassment Policies, ADA Reasonable Accommodation, ADA coverage, Religious accommodation, Recordkeeping and Reporting and many other topics. If you are interested in having an EEOC representative speak at one of your meetings or conferences, want information on training or seminars, or have other questions Ms. Finney wants to hear from you. You can reach her by email at or at (501) 324-6372 – office or (901) 515-6068 (cell). The 2016 calendar is filling up, so be sure to contact Ms. Finney to get on the calendar.


Online SHRM-CP® | SHRM-SCP® Certification Exam Prep Class Online classes begin March 3 and will meet twice per week for 12 weeks on Monday and Thursday evenings from 6:00 PM to 7:30 PM.

SHRM Learning System® Participant Materials

The total cost of the SHRM-CP® | SHRM-SCP® Online Certification Exam Prep Class is $995 You may pay by PayPal, credit card or check. Spring Exam Window – May 1 – July 15, 2016 For more information visit Deadline to register is February 25 Contact OR visit our website at About the instructor: Cynthia Y. Thompson is Principal and Founder of The Thompson HR Firm, a human resources consulting company in Memphis. She is a senior human resources executive with more than twenty years of human resources experience concentrated in publicly traded companies. She is the Editor | Publisher of HR Professionals Magazine, an HR publication distributed to HR professionals in Tennessee, Mississippi, Arkansas, Kentucky and Georgia. Cynthia has an MBA and is certified as a Senior Professional in Human Resources (SPHR) by the Human Resource Certification Institute and is also certified as a Senior Certified Professional by the Society for Human Resource Management. She is a faculty member at Christian Brothers University, Bethel University, and the University of Arkansas Global Campus.


7 HABITS of People with Highly Positive Attitudes By HARVEY DEUTSCHENDORF

“If you think you can do a thing or think you can’t do a thing, you’re right.” – Henry Ford Listen to any motivational speaker and they will emphasize the importance of having a positive attitude. The same goes for any successful person who has shared publicly the attributes that have led to their success. While some may believe that a positive attitude is something we either have or not we are always in control of our thinking and feelings and therefore capable of changing our attitudes at any time. All that we need is the desire to change, the knowledge of what we need to do to change and the willingness to do the work that is required to make that change.

HERE ARE 7 HABITS OF PEOPLE WHO HAVE DEVELOPED HIGHLY POSITIVE ATTITUDES. Developed their emotional intelligence Realizing that their emotions are what motivate and drive them, positive people have learned how to manage their emotions. We all experience ups and downs regularly in our lives. Frustration, disappointment, fear, sadness and anger are feelings that are part of being human. While experiencing these feelings like everyone else, positive people don’t let themselves become overwhelmed by negative feelings. Instead they manage them and continue on with their lives, realizing that everything passes with time. They also don’t make decisions when feeling strong emotions but wait until they are able to think rationally and are on an even keel. They force themselves to keep moving and take on tasks even when they don’t feel like doing so, realizing that once they get moving their feelings and attitude will improve. They are aware that beginnings are often difficult but things will improve once they get further along and they will feel a sense of accomplishment for having overcome their initial resistance and carried on.

Believe in themselves and their abilities While having experienced failures like everyone else, positive people know that to be successful we need to take risks and push their boundaries. They approach new challenges with the belief that they will either be successful or take away lessons from the experience that will lead them to be successful in the future.

Continuously set goals Positive people feel the need to accomplish and are constantly striving to reach new goals that they have set. They use goals to mark their progress and as a way of motivating them to stay on target. Goal setting is a way of life and once they have reached one goal, they set another one. Having something to constantly strive for adds substance and meaning to their lives. While they are happy and grateful for what they have, they are never satisfied, always striving to learn, grow and accomplish more. They are curious and always looking for new ways to push their barriers and strive to reach their potential. 38

Have developed an attitude of gratitude While they are always looking for challenges, positive people are grateful for what they have. They look for ways to thank those who have helped them along the way and are careful to give credit where it is due. Regardless of their circumstances or the conditions of their upbringing they are very aware of and thankful for the gifts that have been bestowed upon them. They realize that being happy with where they are will help them achieve more in their lives.

Always look for the good in all situations Positive people are a pleasure to be around since they tend to bring the best to all situations that they are part of. They frequently use humor to brighten up and liven up events and look for the silver lining in everything that goes wrong. Instead of looking to blame, they look for solutions and lessons that can be gleaned from every situation and event that has not gone well.

Surround themselves with positive people Misery loves company and miserable people will quickly realize that they will not get any support or encouragement from those who are positive. Positive people also love company, but in the form of other positive people. Their demeanor and energy that they emit tends to attract other positive people to them. Surrounded by other people similar to them has the benefit of helping them stay on the bright side and even increase it.

Continuously learning from successful people Whether attending lectures, reading an autobiography of a successful person or listening to a motivational recording while driving, positive people are on a life long journey of continuous improvement. They frequently have mentors and are always seeking to learn from those who they consider to have been successful in the area of their lives in which they have a strong interest. Highly passionate, they are constantly asking questions and looking for ways to learn and improve themselves. They are the people that it feels good to be around as they show an interest in our lives and are always asking us questions about ourselves. Harvey Deutschendorf is an emotional intelligence expert, author and speaker. To take the EI Quiz go to His book THE OTHER KIND OF SMART, Simple Ways to Boost Your Emotional Intelligence for Greater Personal Effectiveness and Success has been translated into 4 languages including Chinese. You can follow him on Twitter @theeiguy.

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March 2016 issue (1)  
March 2016 issue (1)