September 2015 issue

Volume 5 : Issue 9 TM

Anniversary Issue www.HRProfessionalsMagazine.com

A Flak Jacket Against Blowing Up HR

The 50th

Anniversary

of the EEOC

Peter Capelli, PhD

The Cloud is Safe

George W. Taylor Professor of Management at the Wharton School

Best Kept HR Secret Job Description Software for New FLSA Regs

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Bringing Human Resources & Management Expertise to You

77%

of organizations saw increases in health care costs in 2015 according to SHRM Employee Benefits Survey www.HRProfessionalsMagazine.com Editor

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

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

Park Avenue Design Contributing Writers

Chris Anderson Jennifer Blake Brandi Boles Bruce E. Buchanan Meg Campbell Peter Capelli William Carmichael Asaf Cidon Matthew Courtner Harvey Deutschendorf Stacie Engelmann Ed Fensholt Mary Hamm Katharine Kores Jay Kiesewetter Stacey Stewart Jess Sweere Jeff Weintraub Board of Advisors

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

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

HR Professionals Magazine is published every month, 12 times a year by the Thompson HR Firm, LLC. Reproduction of any photographs, articles, artwork or copy prepared by the magazine or the contributors is strictly prohibited without prior written permission of the Publisher. All information is deemed to be reliable, but not guaranteed to be accurate, and subject to change without notice. HR Professionals Magazine, its contributors or advertisers within are not responsible for misinformation, misprints, omissions or typographical errors. ©2011 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 HR Professional Profile of the Month 9 I’m More Than Talent Management 10 Employee Handbooks are Zombies 14 Raising the Minimum Wage 16 A Flak Jacket Against Blowing Up HR 29 A Book Review – Hallelujah!: An Anthem for Purposeful Work 38 7 Habits of Highly Respected Leaders

WEB EXCLUSIVES HTTP://HRProfessionalsMagazine.com /Exclusive

Departments BENEFITS 20 Employee Benefits After Obergefell COMPLIANCE 22 SEC Awards Maximum Payment to Whistleblower 30 DOL’s New Economic Realities Test for Independent Contractors 37 Company Fined $605,000 for I-9 Violations EMPLOYMENT LAW 24 Stay Out of Timekeeping Trouble: Best Practices for Preventing FLSA Claims 26 Title VII Does Not Recognize Discrimination Based on Sexual Orientation 32 EEOC Celebrates 50 Years 36 The Legal Challenges of Telecommuting HR TECHNOLOGY NEWS 12 Highlights of ADP Seminar in Brentwood 18 The Best of HR Technology Revealed 28 Are You Ready for Modernized and Simplified FLSA? 34 The Cloud is Safe

Industry News

6 14th Annual Employment Law and Legislative Affairs Conference in Little Rock 7 SHRMGA 2015 State Conference in Savannah 8 SHRM-Memphis HR Excellence Awards 17 31st Annual KYSHRM Conference in Louisville 19 36th Annual Wimberly Lawson Annual Employment Law Conference in Knoxville 25 23rd Annual TNSHRM State Conference & Expo in Chattanooga

Next Issue

Top Labor and Employment Law Attorneys www.HRProfessionalsMagazine.com

3

a note from the Editor

This month we are excited to be the official media

We

are celebrating our Fourth Anniversary with this issue, and we extend a heartfelt thank you to our sponsors, contributors, Advisory Board, and subscribers! It is such a pleasure working with the HR community and partnering with our sponsors who have made this publication possible for the past four years. It is great fun traveling throughout our footprint and visiting the SHRM volunteers from the State Councils and the local chapters in Tennessee, Georgia, Kentucky, Arkansas, and Mississippi.

sponsor for the ARSHRM 14th Employment Law and Legislative Conference in Little Rock September 17-18. You still have time to register for this annual event, which features legislative updates and of course the ever changing regulations from the DOL, EEOC, OFCCP, NLRB . . . This year Mike Aitken, VP SHRM Government Affairs, will be a keynote speaker along with William Cash from the EEOC. Hope you will join us in Little Rock for one of our favorite annual events!

The cover of our Premiere Issue September 2011

We will be joining the SHRMGA State Conference in Savannah on August 30-September 1. We are very honored to be the official media sponsor for

What an honor to have Dr. Peter Capelli in this issue who authored “It’s Time to Blow Up HR and Build Something New,” featured on the cover of the August Harvard Business Review. I know you will enjoy reading his excellent follow up article in this issue, “A Flak Jacket Against Blowing Up HR,” on page 16. Dr. Cappelli is the George W. Taylor Professor of Management at The Wharton School at the University of Pennsylvania, and Director of Wharton’s Center for Human Resources. He is a regular contributor to HRE Online.

the SHRMGA Conference and we will be bringing you the highlights daily on Facebook, LinkedIn and Twitter. Meet us in Louisville September 23 - 25 for the 31st Annual KYSHRM Conference.

We will also bring you all the highlights from these exciting conferences in our October issue.

Looking forward to seeing our TNSHRM friends

Our emphasis this month is HR Technology and we are bringing you news about new software to help you update your job description to comply with the new FLSA regs.

Be sure your catch Jennifer Blake’s article on preparing for the modernized and simplified FLSA. Plus we have an excellent article about The Cloud on page 34. Speaking of HR technology, if you are a member of MT|SHRM in Nashville, you will not want to miss the ADP Seminar in Brentwood on September 10.

Congratulations to the recipients of the first annual SHRM-Memphis HR Excellence Awards! See page 8 for a list of the winners. We will have full coverage of the event, which is on September 9 at the Holiday Inn – University of Memphis in our October issue. It is an honor to be a platinum sponsor of this inaugural event. We are also proud to partner with the Greater Memphis Chamber for the 2015 HR Legal Summit, which will be October 22 at the Hilton Memphis.

in Chattanooga October 7-9 for the 23rd Annual Conference and Exposition.

September is a fantastic month for HR professionals and we look forward to seeing you at the fall Conferences! If you are unable to attend, I hope you will follow me on Twitter @cythomps and on Facebook and LinkedIn as I bring you coverage from these events. And mark your calendars to join us September 29 for our monthly complimentary HRCI | SHRM virtual event sponsored

by Data Facts.

Enjoy the conferences!

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

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www.HRProfessionalsMagazine.com

Peter on the cover

CAPPELLI

PETER CAPPELLI, PhD Wharton School of the University of Pennsylvania Peter Cappelli is the George W. Taylor Professor of Management at The Wharton School and Director of Wharton’s Center for Human Resources. He is also a Research Associate at the National Bureau of Economic Research in Cambridge, MA, served as Senior Advisor to the Kingdom of Bahrain for Employment Policy from 2003-2005, and since 2007 is a Distinguished Scholar of the Ministry of Manpower for Singapore. He has degrees in industrial relations from Cornell Professor Cappelli has served on three committees of the National Academy of Sciences and three panels of the National Goals

University and in labor economics from Oxford where he was a Fulbright Scholar. He has been a Guest Scholar at the Brookings Institution, a German Marshall Fund Fellow, and a faculty member at MIT, the University of Illinois, and the University of California at Berkeley. He was a staff member on the U.S. Secretary of Labor’s Commission on Workforce Quality and Labor Market Efficiency from 1988-’90, Co-Director of the U.S. Department of Education’s National Center

for Education. He was recently

on the Educational Quality of the Workforce, and a member of the Executive Committee of the

named by HR Magazine as one

U.S. Department of Education’s National Center on Post-Secondary Improvement at Stanford

of the top 5 most influential

University.

management thinkers and was elected a fellow of the National Academy of Human Resources.

He received the 2009 PRO award from the International Association

Professor Cappelli’s recent research examines changes in employment relations in the U.S. and their implications. These publications The New Deal at Work: Managing the Market-Driven Workforce, which examines the decline in lifetime employment relationships, Talent Management: Managing Talent in an Age of Uncertainty, which outlines the strategies that employers should consider in developing and managing talent (named a “best business book” for 2008 by Booz-Allen), and The

of Corporate and Professional

India Way: How India’s Top Business Leaders are Revolutionizing Management (with colleagues), which

Recruiters for contributions

describes a mission-driven and employee-focused approach to strategy and competitiveness.

to human resources. He serves on Global Agenda Council

His 2012 book Managing the Older Work (with Bill Novelli) dispels myths about older workers

on Employment for the World

and describes how employers can best engage them. Why Good People Can’t Get Jobs identifies

Economic Forum and a number of advisory boards.

shortfalls with current hiring practices and training practices and has been excerpted in Time Magazine (online) and reviewed in the Wall Street Journal, The New Yorker, and most major business publications. Will College Pay Off? explores the relationship between college degrees and jobs, identifying the factors that determine whether investments in college degrees will lead to good jobs. Related work on managing retention, electronic recruiting, and changing career paths appears in the Harvard Business Review.  www.HRProfessionalsMagazine.com

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Leading People. Leading Organizations.

By JEFF WEINTRAUB & JAY KIESEWETTER

O

Once, not so long ago, handbooks were employers’ friends— we counted on them to help us convey important messages to our employees, protect employees with anti-discrimination/ harassment policies, and send out positive public relations….

Then one day, we were working late in the office. We heard a creak from the conference room, then a low groaning sound. We grabbed our Cardinals baseball bat and our office fireplace poker, and we crept to the conference room. Strangely, the light there had gone out. The groaning sound again….

We slowly entered the conference room. A scream! We spun around, and there … in the corner…. arms outstretched … empty staring eyes ... they’re coming: Handbook Zombies!

We must face the new reality: handbooks might no longer be employers’ friends—they’ve become traps for the unwary employer. That’s right— handbooks are zombies.

Phase One of the Handbook Apocalypse A few short years ago, the Labor Board, seeking to regain relevancy in an era of declining unions, bit hard on handbooks and turned them into employermunching zombies. The Board accomplished this by expanding its views of “concerted activity,” the concept—protected by Section 7 of the Labor Act—that says that employees have the right, not only to form and join unions, but also “to engage in other concerted activities for the purpose of … other mutual aid or protection.” That means that employers cannot have policies, for example, that require employees to be respectful to their supervisors in the workplace! The Board says that employees have the Section 7 right to join together to protest workplace conditions—just because those protests get noisy and disrespectful does not mean that the employees have lost their Section 7 protections.

Phase Two of the Handbook Apocalypse On March 18, the Handbook Apocalypse entered its next phase, when the NLRB General Counsel issued a Memorandum with the catchy title, “Report of the General Counsel Concerning Employer Rules.” The GC Memo summarizes recent NLRB decisions and GC Opinions and provides some guidance as to why certain policies are unlawful while, strangely, other policies with very similar language are deemed lawful. Inscrutably, the Board says it is the context of the handbook provision or policy that is critical to its interpretation.

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The GC Memo notes that, even though a rule or policy may not explicitly prohibit Section 7 activity, it can still be found unlawful in any one of three circumstances, where:

1. Employees would reasonably construe the rule’s language to prohibit Section 7 activity, 2. The rule is promulgated in response to union or other Section 7 activity, or 3. The rule is actually applied to restrict the exercise of Section 7 rights.

So, how can an employer determine whether employees would “reasonably” construe its handbook policies to prohibit Section 7 activities? Therein lies the trap: you can’t! Sure, there are specific rules and policies that we now know the Board will condemn, but there are many, many other rules and policies that have been fine for years, even decades, but now are putting employers at risk under incredibly vague new guidelines that are like puzzles for employers to figure out.

Phase Three of the Handbook Apocalypse The Board, having drawn its line in the sand (albeit, a very squiggly line, often with no easily definable borders), started smacking down unwary employers. For example, a Holiday Inn outside Chicago had a disloyalty rule in its handbook that banned “making or publishing false or malicious statements.” An employee posted a picture of herself and co-workers on Facebook, with the comment that she had been "working like an (sic) slave" that day.

The motel terminated the employee for, among other things, violating its rule and damaging the motel’s reputation. This June, the Board’s General Counsel ruled that the motel’s rule violated the Labor Act, and a later Administrative Law Judge agreed, holding that the rule “reasonably could be construed to prohibit protected activity, such as co-workers discussing with one another the complaints they have about their supervisors." The GC and the ALJ ordered the employer to eliminate the offending policy and reinstate the employee.

Would you have guessed that a company rule against “making or publishing false or malicious statements” would have violated the Labor Act? Or, would you have fallen prey to the Handbook Zombies?

Does your handbook contain a rule requiring that employees preserve confidentiality as to personnel information? According to the General Counsel, “[a] confidentiality rule that broadly encompasses ‘employee’ or ‘personnel’

information, without further clarification, will reasonably be construed by employees to restrict Section 7-protected communications.” Some employee handbooks prohibit employees from discussing their own or others’ wages— the Board declares such rules unlawful! Also unlawful: “[I]f something is not public information, you must not share it.” Likewise unlawful: “Never publish or disclose [the Employer’s] or another’s confidential or other proprietary information. Never publish or report on conversations that are meant to be private or internal to [the Employer].”

We bet you have a rule or a practice requiring employees interviewed in an internal sexual-harassment investigation to maintain confidentiality. Well, your Labor Board says such a rule violates the Labor Act, unless you can show an ”overriding business necessity” for confidentiality—that requirement will not be satisfied by the need to protect the integrity of the investigation; rather, you must prove that witnesses needed protection, a cover-up needed to be prevented, or the like.

2. Keep your policy narrow. The Board distrusts broad workplace rules.

3. Explain why a particular rule is important, such as by explaining why it is important to the company to keep its pricing confidential, to avoid falling into the hands of competitors who could use it to undercut company prices.

4. Add a disclaimer, that any and all protected concerted activity is exempt from the conduct and other rules.

There are numerous other considerations you should take into account when dealing with handbook provisions, such as the issues relating to the use of cell phones in the plant, access to the company email system by employees who want to solicit for a union, etc—too many issues to cover here today.

But we hope the foregoing is helpful and that we have given you some hope that your handbook will not eat you!

The GC says that the employees’ right to engage in concerted activity prevails, even if in conflict with the employer’s interests; thus, this rule is unlawful: “Employees may not engage in any action that is not in the best interest of [the Employer].”

The Board will invalidate a rule restricting employees’ right to publicly criticize the employer’s labor policies and treatment, such as the following: “[I]t is important that employees practice caution and discretion when posting content [on social media] that could affect [the Employer’s] business operation or reputation.”

Regarding social media, the Board has held that employees’ Facebook “likes” criticizing management’s handling of withholding taxes on their paychecks was “protected concerted activity.” Thus, disciplining those employees on the basis of their “likes” was unlawful.

Further, the GC says that “protected concerted speech will not lose its protection even if it includes intemperate, abusive and inaccurate statements.”

Here are some examples of employee-conduct rules in handbooks that the GC has said are unlawful: “Don’t pick fights online”; “Don’t make insulting, embarrassing, hurtful or abusive comments about other company employees online”; “Avoid the use of offensive, derogatory, or prejudicial comments”; and “Do not send unwanted, offensive or inappropriate emails.” Further, the General Counsel says that a “rule that prohibits employees from engaging in ‘disrespectful,’ ‘negative,’ ‘inappropriate,’ or ‘rude’ conduct towards the employer or management, absent sufficient clarification or context, will usually be found unlawful.” In fact, says the GC, an employee’s criticism of an employer does not lose its protection under the NLRA even if the criticism is false or defamatory, but rather, it must be “maliciously false.”

Thus, a handbook rule requiring employees to “be respectful of others and the Company,” will be held unlawful.

How to Avoid Death by Handbook Giving up? Don’t surrender yet to your handbook—there are solutions.

Brad Pitt single-handedly defeated the zombies in “World War Z.” If you’re not Brad Pitt, then you should instead follow some guidelines—in fact, we follow these and similar rules when we are revising handbooks for our clients to comply with the Labor Act:

1. Context rules! So, include within the statement of the rule some context clues. For example, a rule barring rudeness will fall, but if the rule includes a reference to customers or if the context of the rule demonstrates that the reference is to customers, then the rule is more likely to survive; thus: “Customers are our key to success, and therefore they should be treated well at all times. Disrespect or rudeness will not be tolerated.”

Jeff Weintraub, Managing Partner Fisher & Phillips, LLP jweintraub@laborlawyers.com www.laborlawyers.com

Jay Kiesewetter, Attorney Fisher & Phillips, LLP jkiesewetter@laborlawyers.com www.laborlawyers.com

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ACA Best Practices: Controlling Cost and ACA Best Practices: Controlling Cost and Mitigating Risk Mitigating Risk When: Thursday, September 10, 2015 When: Thursday, September 10, 2015 Time: Time:

11:30am – 1:30pm (lunch included) 11:30am – 1:30pm (lunch included)

Where: Mere Bulles (Truman Room) Where: Mere Bulles (Truman Room) 5201 Maryland Way, Brentwood, TN 37027 5201 Maryland Way, Brentwood, TN 37027 Who: Who:

HR and Benefits Professionals, Compliance Officers, Legal Counsel and HR and Benefits Professionals, Compliance Officers, Legal Counsel and Finance Executives Finance Executives

Registration: Registration:

R Please send email to: R Please send email to:

Alice.Rios@adp.com Alice.Rios@adp.com

Two Topics: Two Topics: 1. ACA Best Practices: Strategies to Help Control Costs, Mitigate Risk and 1. ACA Best Practices: Strategies to Help Control Costs, Mitigate Risk and Decrease Penalties Decrease Penalties 2. Total Absence Management: How It Impacts Your ACA Strategy and 2. Total Absence Management: How It Impacts Your ACA Strategy and Avoiding Penalties Avoiding Penalties

ACA Best Controlling Cost and What You WillPractices: Learn: What You Will Learn: Mitigating Risk focus is payroll, HR, benefits or your organization’s Whether your functional

Whether your functional focus is payroll, HR, benefits or your organization’s finances (all of which play important roles for ACA compliance management finances (all of which play important roles for ACA compliance management within an organization), we’ll provide you with actionable strategies and best within an organization), we’ll provide you with actionable strategies and best practices Thursday, to addressSeptember recent regulatory updates that will: When: 10, 2015 practices to address recent regulatory updates that will:  Simplify Administration Time: 11:30am – 1:30pm (lunch included)  Simplify Administration  Help reduce the Cost of Compliance  Help reduce the Cost of Compliance  Help ensure your organization is compliant with the Shared Where: Mere Bullesthat (Truman Room)  Help ensure that your organization is compliant with the Shared Responsibility Requirements under TN ACA 5201 Maryland Way, Brentwood, 37027 Responsibility Requirements under ACA Who: HR and Benefits Professionals, Compliance Officers, Legal Counsel and ADP’s experts remain at the forefront of helping employers understand the Finance Executives ADP’s experts remain at the forefront of helping employers understand the complex compliance, financial, and strategic issues surrounding workforce complex compliance, financial, and strategic issues surrounding workforce management. Let us help you attain your personal and organizational BEST. Registration: send Alice.Rios@adp.com management. RLetPlease us help youemail attainto:your personal and organizational BEST. Join us today!

Join today!

Two us Topics: * The content presented during this webcast should not be construed as legal advice. ADP encourages you to consult with appropriate benefits counsel.

The of the presented HRCI seal isduring not anthis endorsement by the HRbeCertification Institute of theADP quality of the program.

It means thatappropriate this program has met the HR Certification Institute’s * Theuse content webcast should not construed as legal advice. encourages you to consult with benefits counsel. criteria to be pre-approved for recertification credit.

The use of the HRCI seal is not an endorsement by the HR Certification Institute of the quality of the program. It means that this program has met the HR Certification Institute’s The ADP Logo and ADP are registered trademarks of ADP, LLC. Copyright © 2014 ADP, LLC. All other trademarks and service marks are the property of their respective owners. criteria to be pre-approved for recertification credit.

1. ACA Best Practices: Strategies to Help Control Costs, Mitigate Risk and Decrease Penalties 2. Total Absence Management: How It Impacts Your ACA Strategy and Avoiding Penalties

The ADP Logo and ADP are registered trademarks of ADP, LLC. Copyright © 2014 ADP, LLC. All other trademarks and service marks are the property of their respective owners.

What You Will Learn: Whether your functional focus is payroll, HR, benefits or your organization’s roles for ACA compliance management within an organization), we’ll provide you with actionable strategies and best

12finances www.HRProfessionalsMagazine.com (all of which play important

Featured Speakers Featured Speakers John A. Haslinger, John A. Haslinger, Vice President Strategic Vice President Strategic Advisory Services, ADP, LLC. Advisory Services, ADP, LLC. Mr. Haslinger is Vice President Mr. Haslinger is Vice President Of ADP Benefits Outsourcing Of ADP Benefits Outsourcing Consulting, responsible for Consulting, responsible for He has 36 years of Compliance and Health Care.

Compliance He hasbenefits, 36 years of experience inand theHealth area ofCare. employee experience in the area of employee benefits, spanning strategic design, compliance and spanning strategic design, compliance administration for both retirement andand health administration for both retirement and health and welfare benefits plans.

In particular, his and welfarehas benefits plans.

In particular, his experience focused on operations, experience operations, outsourcinghas andfocused shared on service environments. outsourcing and shared service environments.

Prior to joining ADP, Mr. Haslinger was a Director Prior to joining ADP, Mr.Human Haslinger was Practice a Director in Deloitte Consulting’s Capital in Deloitte Consulting’s Capital Practice where he consulted withHuman both plan sponsors and where he consulted with–both plan sponsors and providers in these areas addressing strategic, providers in these areas –issues. addressing operational, and funding John strategic, has had operational, funding issues.

John has had in more than 30and professional articles published, more than professional published, addition to 30 numerous whitearticles papers, and has in addition to numerous white papers, conferences and has been a frequent speaker at industry been a frequent speaker at industry conferences and events. and events.

Sushma Tripathi, Sushma Tripathi, Vice President Workforce Vice President Workforce Planning And Benefits Planning And Benefits Consulting Strategic Advisory Consulting Strategic Services, ADP, LLC. Advisory Featured Speakers Services, ADP, LLC. Ms. Tripathi serves as Vice President, Workforce Ms. Tripathi as Vice President, Workforce Planning andserves Benefits Consulting in ADP’s John A. Haslinger, Planning and Benefits Consulting Strategic Advisory Services group.inInADP’s this role, she Vice President Strategic Strategic Advisory Services group. In thisclients role, she is responsible for actively with to Advisory Services, ADP, LLC.working is responsible for actively working with clients to help them execute their human capital helpHaslinger them execute human capital management with a focus on health and Mr. isstrategy Vicetheir President management strategy withasa well focusasonworkforce health and productivity management Of ADP Benefits Outsourcing productivityresponsible management planning.

Consulting, for as well as workforce planning. and Health Care. He has 36 years of Compliance She startedinwith through the experience the ADP areain of2012 employee benefits, She started with ADP in 2012 throughSolutions the acquisition of SHPS Human Resource as spanning strategic design, compliance and acquisition ofPresident SHPS Human Resource Solutions a Senior Vice of Product Management. administration for both retirement and health as a Senior Vicebenefits President Product Management.

Ms. Tripathi was partplans. ofofthe and welfare Instrategic particular, his Ms. Tripathihas was part ofon theoperations, strategic development and innovation team that helped experience focused development and innovation thataligned helped ensure product development activities outsourcing and shared serviceteam environments. ensure product aligned for with client goalsdevelopment to deliver theactivities best experience with client goals to deliver bestwas experience for clients and participants.

Shethe brings more than 20 Prior to joining ADP, Mr. Haslinger a Director clients and participants.

She brings more than 20 years of experience in progressive leadership and in Deloitte Consulting’s Human Capital Practice years of in progressive leadership and management, primarily inboth totalplan absence where heexperience consulted with sponsors and management, primarily total absence management, COBRA, comp,strategic, disability, providers in these areasworkers’ –inaddressing management, COBRA, workers’ comp,has disability, health and wellness, disease management and operational, and funding issues.

John had healththan and wellness, disease management benefits administration outsourcing Prior toand more 30 professional articles published, in benefitsSHPS, administration outsourcing to joining Ms. Tripathi served as and aPrior Director, addition to numerous white papers, has joining SHPS, Ms. Tripathi as conferences a Director, Product Development and Management for been a frequent speaker atserved industry Product Development for CIGNA. Ms. Tripathi hasand an Management MBA from Drexel and events.

CIGNA. Ms. Tripathi has an MBA from Drexel University.

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Raising the Minimum Wage The Effects of an Increase on Restaurant and Retail Operators

By BRANDI BOLES, ED FENSHOLT and STACIE ENGELMANN

Restaurant and retail operators have seen major changes occur during the past several years that have affected their labor costs.

The most notable change is the passing of the Affordable Care Act (ACA) and its requirement that companies provide health coverage to employees that work more than 30 hours a week.

Now as the federal government debates whether to raise the federal minimum wage, restaurant and retail operators must look anew at what impacts these compounding changes will have on the bottom line of their businesses.

An increase in labor costs will have both direct and indirect consequences on restaurant and retail operators and their employees.

These include: ❖ Workers’ compensation and general liability policy costs. ❖ Workers’ compensation claims costs. ❖ ACA impact to employers. ❖ ACA and Medicare impact to employees. ❖ Wage garnishment impact to employers and employees. ❖ Unemployment benefits and tax obligations. ❖ Compressed wage issues.

While supporters claim that a minimum wage increase would greatly benefit the economy and result in no reduction in job force, the opposition claims that the proposed increases would be detrimental to minimum wage employees and employers, resulting in a loss of thousands of jobs.

An increase in labor costs will have both direct and indirect consequences on restaurant and retail operators and their employees. These include:

The increase in the federal minimum wage to $10.10 would result in an average increase of $2.18 across all states and the District of Columbia. The actual increase in wage amounts for the individual operator will either be tempered or exacerbated by the operator’s mix of states in which it does business.

❖ Workers’ compensation and general liability policy costs. ❖ Workers’ compensation claims costs. ❖ ACA impact to employers. ❖ ACA and Medicare impact to employees. ❖ Wage garnishment impact to employers and employees. ❖ Unemployment benefits and tax obligations. ❖ Compressed wage issues.

While supporters claim that a minimum wage increase would greatly benefit the economy and result in no reduction in job force, the opposition claims that the proposed increases would be detrimental to minimum wage employees and employers, resulting in a loss of thousands of jobs.

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The table below outlines the minimum wage levels in each state as of February 2015. The federal minimum wage law supersedes state minimum wage laws where the federal minimum wage is greater than the state minimum wage.

In those states where the state minimum wage is greater than the federal minimum wage, the state minimum wage prevails.

Restaurant and retail operators must proactively work with their broker and insurance companies to identify the potential exposure involved and craft creative structures to ensure any premium due at audit is being charged in a fair and equitable way to both the restaurant operator and the insurance company.

Workers’ Compensation Claims Costs In addition to higher workers’ compensation premiums, the cost of workers’ compensation claims with indemnity payments will also increase.

The indemnity portion of a workers’ compensation claim reimburses an injured employee for wages lost during the time the employee was unable to work as a result of a compensable workplace injury.

Workers’ Compensation and General Liability Policy Costs Workers’ compensation policy premiums are based on the payroll amounts of your employees. Though the employer’s number of labor hours remains unchanged, as payroll amounts increase, either as a result of an increase to the federal minimum wage level or as a result of state or local minimum wage increases, the workers’ compensation policy premiums will increase as well— either at policy inception or as a result of policy audit.

Additionally, the increase in policy premium will result in higher surcharges and tax amounts levied by the states in which the employer does business as these amounts are calculated as a percentage of the policy premium.

As restaurant and retail operators look to offset the margin erosion that results from the higher labor costs by passing a portion of the increases to the consumer via higher menu or product prices, the operator’s general liability policy premium will be affected as well. General liability policy premiums are based on the sales amounts garnered at the restaurants. As prices increase, the sales amounts increase even if the year-over-year volume remains flat.

If the increases in labor costs do not take effect until after the policy period has begun, and the wage increases were not contemplated by the insured in the exposures supplied to the insurance company at policy inception, a significant policy audit may arise after the policy term’s expiration if the insurance company charges the audit premium at the same rate(s) that the policy inception’s premium was developed.

The employee’s average weekly wage is used when calculating the amount of indemnity benefits owed to the injured employee. As the employee’s average weekly wage increases, so does the indemnity portion of the claim, thereby increasing the entire amount of the claim.

As the cost of claims increase, actuaries of restaurant and retail operators and insurance companies will need to increase their projections of the ultimate amount of losses expected to be incurred.

Employees who are not offered at least modestly robust and affordable coverage through an employer may qualify for federally subsidized health insurance through one of the ACA’s online health insurance marketplaces. An employee’s subsidy amount, through the marketplace, depends on his or her household income, which is estimated at the time of the employee’s application for coverage. An increase in the minimum wage might drive an employee’s household income well in excess of the anticipated amount, causing the employee to receive subsidies in an amount greater than the employee actually qualified for. Reconciliation of actual—versus authorized— subsidies occurs on the employee’s tax return at year end and could cause consternation for employees who received more than they should have and are asked to refund the difference.

Wage Garnishment Impact to Employers and Employees Garnishment and medical child support orders are the bane of many restaurants’ HR departments. A bigger paycheck can mean larger garnishments and might allow for sufficient wages for the employer to unilaterally enroll the employee in a health plan in order to comply with a medical child support order. Because the employer often subsidizes a portion of the coverage cost for an enrolled employee, the employer takes on additional cost for each such employee.

Compressed Wage Issues The topics we have discussed have focused on employers and their employees making minimum wage. While these may be the most immediate issues, it is important to remember that a hike in the minimum wage will affect many more employees through compressed wage issues.

ACA Impact to Employers Many employers struggle to meet the ACAs requirement to offer “affordable” health insurance to full-time employees, particularly where the employees are modestly paid.

Because affordability is determined as a percentage of household income, an increase in the minimum wage allows the employer to charge more for its health insurance offering while still complying with the affordability rule.

ACA and Medicaid Impact to Employees An increase in the minimum wage has several consequences for employees over and above the increase in take-home pay. For example, an increase in the minimum wage might drive some employees’ income above the Medicaid eligibility threshold, disqualifying them from that health insurance program and perhaps compelling them to enroll in employer-based coverage in order to meet the ACA’s “individual mandate.”

For those who have been making $10.10 per hour (or more) based on experience levels and training, how will they be affected by new hires making the same wages? To retain valued employees, your increase in wages may not be limited to individuals making the current minimum wage alone.

For more information on this topic and how it may affect your company, please contact your Lockton team.

Ashley Pace

Lockton’s Memphis Office 901 757 6902 apace@lockton.com

Brad Owens

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

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15

A Flak Jacket Against Blowing Up HR

By PETER CAPELLI

THE COVER of the current issue of the Harvard Business Review titled “Blow Up HR?” is getting a lot of attention.

Given that I wrote the lead article, I can say something about the reaction.

The Blow Up HR title was based on a little post by Ram Charan in HBR exactly a year ago titled “It’s Time to Split HR.” Less incendiary for sure than the current cover, his proposal to split off the leadership development part of HR from everything else wasn’t especially radical, but the article tapped into complaints about the HR function and especially a sense that HR wasn’t doing anything productive.

Some of the reasons why so many people don’t like HR have nothing to do with whether HR is doing a good job.

HR makes people behave, and they don’t like that.

HR makes people behave, and they don’t like that.

For many people, the most important thing about their workday is their interaction with other people. It’s like the high school cafeteria with HR being the monitor that tells you not to tell racist or sexist jokes even if you think they are funny, not to promote your friends, and that hiring your wife’s cousin may not be the best move. No one likes the lunchroom monitor.

change their behavior, and we don’t have the authority to make them do it, we nag. HR frequently finds itself in this position, nagging supervisors to have serious conversations with employees about their performance or their careers, pushing employees to get involved in corporate charities like the United Way or volunteer programs, cajoling people to get into wellness programs.

Many people in HR would like to avoid being the nag. One of the things HR should do is duck responsibility for programs where it doesn’t have the authority to enforce them. Whether HR people would be happier not having to enforce equal opportunity issues and corporate culture norms is another question. Here as well, though, HR didn’t dream up these responsibilities.

They came from the top of the house.

Other functions have their crosses to bear as well. HR seems unusually burdened by the hand it has been dealt.

People who want to hate HR might want to look to the dealer first.

The people who find this most irritating are often those further up the hierarchy. HR is the function that tells even top executives what to do on a day-to-day basis. When bosses do hear that subordinates are unhappy with something they’ve said or done, it usually comes from HR. So we blame the messenger.

Business has helped lead the change in social norms on issues like race and sex and now sexual orientation, which puts the people whose norms have not changed uncomfortably between their behavior at work and their values at home.

Again, HR gets the blame for that discomfort.

HR often finds itself in the position of responsibility for some corporate issue or task without the authority to do anything about it. When we try to get people to

Peter Cappelli, PhD George W. Taylor Professor of Management and Director, Center for Human Resources at the Wharton School of the University of Pennsylvania

A version of this article, “Why Blowing Up HR Isn’t a Good Idea,” appeared in the August issue of HRE Online.

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Our day-and-a-half program covers important legal decisions and societal trends affecting employment. Topics are carefully selected to address the concerns of all employers and to give you an opportunity to select from a wide array of topics dealt with in detail. A few of the thirty-five or more topics are: • Cyber Security, Cyber Crime and Employee Data • The Importance of Effective Hiring (Background Checks, Pre-employment testing, and Drug Testing, Including Medical Marijuana and FCRA Compliance) • Healthcare Reform: A Look Behind and the Road Ahead • NLRB (Quickie Elections, Employee Handbooks, etc.)

• Records Retention: The Devil is in the Details • Impact of Social Media in the Workplace • FMLA Foibles • Sex, Gender, Same-Sex Marriage & Transgender Employees: What Does it All Mean?

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Employee Benefits after Obergefell – Impact on Open Enrollment

By STACEY L. STEWART

In June of 2015, the U.S. Supreme Court ruled in Obergefell v. Hodges that states must license and recognize same-sex marriage. As a result, you may be feeling the pressure to quickly figure out what changes are needed to your company’s employee benefit plans as you prepare for open enrollment. This may come as a surprise, but the ruling, while certainly a landmark decision, actually has a relatively small direct impact on employee benefit plans.

Good news, right? Well, yes and no, depending on your current benefit plan structure. If you provide health and welfare benefits to same-sex spouses on the same terms as to opposite-sex spouses, then you are in a pretty good position.

You may need to make some adjustments to payroll systems and take other administrative actions described below, but are unlikely to need plan design changes.

However, if your health and welfare plans do not cover same-sex spouses to the same extent as opposite-sex spouses, you may now be at an increased risk of discrimination-based lawsuits.

You may be thinking, “But wait, I thought you said the Obergefell decision has a relatively small direct impact on employee benefit plans?”

That is true; it is the ruling’s indirect impact coupled with recent guidance from the EEOC, among other events, which call into question the advisability of continuing such structure.

Let’s take a step back and look at how we got here. In June of 2013, the U.S. Supreme Court in U.S. v. Windsor struck down the portion of the Defense of Marriage Act that limited 20

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federal recognition of marriage to oppositesex spouses. The IRS and DOL then issued guidance that a spouse, for federal tax law and ERISA purposes, is any person who is legally married (in the U.S. or abroad) regardless of whether same-sex marriage is legal in their state of residence.

In the wake of Windsor, it was clear that same-sex spouses must be treated as spouses for qualified retirement plan purposes, including the spousal consent rules, spousal annuity protections, minimum distribution rules, etc.

But the degree of clarity for qualified retirement plan purposes was unmatched on the health and welfare side. While Windsor impacted those health and welfare plan provisions tied to federal law (e.g., who is a spouse for COBRA purposes, health coverage for same-sex spouses can be paid pre-tax under a cafeteria plan etc.), employers still seemed free to design health and welfare plans to exclude same-sex spouses.

As time progressed, some states passed laws requiring spousal health coverage include same-sex spouses, which left employers who wished to sponsor insured plans in the applicable market no choice. And in March of 2014, HHS announced that, for 2015, health insurers generally must extend the same coverage for same-sex and opposite-sex spouses. Selfinsured plans not subject to state insurance law may still retain some flexibility to exclude same-sex spouses from spousal coverage, at least in theory, but in actuality, these plans pose risks for discrimination-based claims.

Enter the Obergefell decision. It did not change ERISA, the federal tax code or any other law affecting employee benefit plan design. But, what it did do, is recognize the right of same-sex couples to marry, requiring all states to allow the marriage and recognize a same-sex marriage performed out of state. This latest ruling from our nation’s highest court will arguably be used as further support for sexual orientation-based discrimination claims.

In fact, the EEOC recently clarified its position in a July 2015 decision that discrimination based on sexual orientation is unlawful under Title VII of the Civil Rights Act. While not binding legal authority, many courts view the EEOC position as persuasive.

In the end, the issue of discrimination based on sexual orientation relative to employee benefit plans will work its way through the courts.

There are already cases on the dockets. But at this point, most benefit plan advisors seem convinced that an employer who does not offer health and welfare coverage to same-sex spouses on the same terms as to opposite-sex spouses substantially increases its exposure to potential liability for discrimination-based claims.

So what should you do now? Below are some important considerations as we approach open enrollment: • If you limit health and welfare coverage to oppositesex spouses, consult with your plan advisors about the potential legal ramifications of continuing with this plan design.

• Consider whether to continue offering health and welfare coverage to domestic partners and civil unions.

Many employers offered such coverage because same-sex marriage was not an option in certain states. Now that all states must license and recognize same-sex marriage, some employers are rethinking their strategy.

• Review plan documents, summary plan descriptions and related policies and procedures to ensure all documentation correctly states plan terms and administrative procedures. For example, changes may be needed to properly define ‘spouse’ to ensure same-sex spouses are covered.

• Ensure open enrollment materials accurately communicate your coverage options, especially if you have not covered same-sex spouses for one or more benefits in the past.

• Update plan administrative forms as needed. Consider recommending participants review beneficiary designation forms to ensure they reflect current wishes.

For example, consent from a same-sex spouse is generally needed under a qualified retirement plan to designate a non-spouse beneficiary or to waive certain spousal benefits.

• Confirm your payroll system is set to apply proper federal and state tax rules. Your system may need changes, for example, to cease imputing the value of same-sex spousal coverage in employee income for state tax purposes. While the Windsor ruling clarified that same-sex spousal health coverage is not taxable under federal law, it continued to be taxable under some state tax laws. Since all states must now recognize same-sex spouses under Obergefell, it seems clear this treatment must change.

• This may be a good time for an internal audit of all benefit-related procedures relative to same-sex spouses. For example, do you need to revise your FMLA, COBRA or HIPAA special enrollment procedures? If you outsource any HR/benefit or payroll functions, confirm that your vendors have proper systems and safeguards in place.

The above list is not intended to be exhaustive. There may be other potential issues to consider depending on the benefits you offer and to whom. Contact your benefit plan advisor to discuss next steps.

Stacey L. Stewart, JD Senior Advisor, Client Resource Team Regions Insurance, Inc. stacey.stewart@regions.com www.regionsinsurance.com

“What is 6056 reporting?

Am I supposed to be doing this now and what information am I supposed to be tracking?”

“I have three new hires coming on this month. How do I know if they are variable-hour versus full-time and when do I have to offer them benefits?”

Guiding You Through the Tough Questions Your business faces tough decisions every day when it comes to health reform – decisions that impact your benefits program, your employees, and your bottom line.

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

Katrina McKinney

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

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

www.regionsinsurance.com

The Coverage You Need.

The Guidance You Trust.

Find Regions Insurance offices in these states: Alabama, Arkansas, Florida, Georgia, Indiana, Louisiana, Mississippi, South Carolina, Tennessee and Texas ©2015 Regions. Regions Insurance is an affiliate of Regions Bank. Products and services are offered by Regions Insurance, Inc., and underwritten by unaffiliated insurance companies.

SM

SEC Awards Maximum Payment to Whistleblower

By MEG CAMPBELL

On

April 28, 2015, the Securities and Exchange Commission (SEC) announced an award that highlights several important trends in the fast-developing area of whistleblower law. Bringing to a close the first-ever retaliation enforcement case the SEC pursued under the DoddFrank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the SEC awarded the maximum payment allowed under the law – equal to 30% of the amount recovered by the SEC – to the Paradigm Capital Management former head trader employee who blew the whistle on trading violations under the Investment Advisers Act of 1940. The employee will receive more than $600,000 for providing original information to the SEC that led to the successful recovery of $2.2 million. Also named in the action individually was Candace King Weir, Chief Executive Officer, Chief Investment Officer, Portfolio Manager, and Director of Paradigm Funds Advisor LLC, who owns 73% of the company, and who, the SEC determined, has ultimate control over decisionmaking at the company.

The SEC Reiterates Its Encouragement of Whistleblowers and Its Warning to Employers In announcing the award, the SEC reinforced its commitment to encouraging and protecting whistleblowers, on whom it relies to provide information essential to its efforts to protect the investing public. The Chief of the SEC’s Office of the Whistleblower (OWB), Sean McKessy, used the occasion of the award announcement as an opportunity to underscore that point: “My hope is that the award today encourages potential whistleblowers to come forward in light of our demonstrated commitment to protect them against retaliatory conduct and make significant financial awards to whistleblowers who suffer employment hardships as a result of reporting possible securities violations.” Mr. McKessy, the first Chief of the OWB, which was created by Dodd-Frank, has been tireless in publicizing the work of the OWB and the importance of whistleblowers to the enforcement mission of the SEC. His public statements are closely watched for signals about the SEC’s and the OWB’s initiatives regarding whistleblowers.

The Director of the SEC’s Division of Enforcement, Andrew Ceresny, thanked the Paradigm Capital whistleblower for doing the right thing despite retaliation by his employer, and issued a warning to employers inclined to permit or carry out retaliation against whistleblowers: “The Enforcement Division is committed to taking action when appropriate against companies and individuals that retaliate against whistleblowers.” The inclusion of “individuals” in the warning is an important reminder that under Dodd-Frank, in contrast to some other anti-retaliation laws, individuals who retaliate against whistleblowers can, in some circumstances, be liable.

The Paradigm Case: How the SEC Made its Retaliation Case The Paradigm Capital case first gained broad public notice on June 16, 2014, when the SEC issued an order in its enforcement action, following a settlement in which neither Paradigm nor Weir admitted wrongdoing. The order required Paradigm Capital to pay over $2 million in fines, for trading violations of the Investment Advisers Act and for violations of the whistleblower protection provisions of the Securities Exchange Act of 1934. Of the total settlement amount, $300,000 was related to a civil penalty and the remainder was paid to investors involved in the trades. It was the SEC’s first enforcement of the relatively-new whistleblower protection provisions of Dodd-Frank, however, that brought particular attention to the order.

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The anti-retaliation provisions the SEC enforced by way of the case were added to the Securities Exchange Act in 2010 as part the Dodd-Frank Amendments. They prohibit an employer from discharging, demoting, suspending, harassing, or otherwise discriminating against an employee for reporting potential violations to the SEC. The SEC has the power to bring anti-retaliation enforcement actions under the Securities Exchange Act, but had not done so before the Paradigm Capital case.

According to the SEC’s order, Paradigm Capital violated the law’s anti-retaliation provisions by engaging in a series of retaliatory actions against its then-head trader, who had reported allegedly prohibited transactions to the SEC on March 28, 2012. When he told his employer in July 2012 about his report to the SEC, he was temporarily removed from the trading desk pending an investigation. Shortly thereafter, Paradigm Capital informed the head trader/whistleblower that their relationship had been “irreparably damaged,” and began to negotiate a severance agreement. Severance discussions were unsuccessful, however, and the whistleblower asked to return to work as head trader. Paradigm Capital allowed the whistleblower to return to work with the same compensation, but would not allow him to return to his position as head trader. Instead, the company relocated the whistleblower to a different office and told him to investigate and identify potential wrongdoing by the company – the very conduct about which he had notified the SEC. Paradigm Capital later accused the whistleblower of violating the company’s confidentiality policy. Ultimately, the whistleblower resigned on August 17, 2012.

The SEC found that Paradigm Capital did not have a legitimate reason for removing the whistleblower from his position as head trader, changing his job duties to focus on low-level compliance assistance rather than trading, and stripping him of his supervisory responsibilities.

Therefore, the agency found that Paradigm Capital had violated the antiretaliation provisions of the Securities Exchange Act, and also had violated the Investment Advisers Act of 1940 for the underlying trading about which the whistleblower complained. In addition to agreeing to pay a total of approximately $2.2 million to resolve the dispute, Paradigm Capital agreed to cease and desist from further violations of Dodd-Frank, and to hire an independent compliance consultant to conduct a comprehensive review of the company’s trading policies.

The Award: Determining The Worth of a Whistleblower’s Assistance Since its inception, the SEC OWB has announced a total of more than $50 million in awards to 17 whistleblowers. Under Dodd-Frank, awards can range from 10 to 30% of the amounts recovered, and the SEC considers a number of factors in determining the amount of each award. In some of the largest dollar amount awards to date, the whistleblower did not receive the highest percentage award, because the SEC determined that the whistleblower’s conduct did not warrant the maximum award. In one case, the whistleblower delayed in bringing the information forward to the SEC, in another, the whistleblower did not cooperate in internal company efforts to investigate the alleged wrongdoing.

In Paradigm Capital, however, the retaliation the employee suffered, as well as his conduct in coming forward with original information that proved key to a successful enforcement action, warranted the maximum award. The Order noted that the Claims Review Staff, which evaluates the evidence related to the factors considered in arriving at the percentage of the award, “considered the substantial evidence that the whistleblower suffered unique hardships as a result of reporting, and also found the Commission’s law enforcement interest to be compelling given the Commission’s previous findings of unlawful retaliation against this whistleblower.”

The value of a robust, continually-improving culture of compliance for every company, and active encouragement of and engagement in compliance at every level of the company, cannot be overstated. Individuals with substantial ownership or decisionmaking authority will be subject to particular scrutiny regarding their commitment to compliance, the tone they set in the company, and their involvement in decisions that affect whistleblowers, and they even may find themselves named individually in retaliation claims or enforcement actions. Companies must take measures to ensure that their employees believe that they are committed to doing the right thing, and that raising concerns will not trigger retaliation. It is important to make sure decisionmakers understand that retaliation does not mean only a loss of position or loss of pay, but may include the less-obvious or less-calculable harm of marginalizing or stigmatizing the whistleblower employee, or of depriving him of his right to complain confidentially or anonymously. Employers should review their whistleblower compliance policies and procedures and train their employees to take appropriate action to comply with anti-retaliation policies. As always, employers should carefully document the reasons taken for any actions against an employee so that they can explain their actions in the event of an investigation, and should ensure special precautions in the review of any proposed decisions or actions affecting a whistleblower.

Margaret (Meg) Campbell currently serves as national co-chair of Ogletree Deakins’ Whistleblower Practice Group.

Margaret (Meg) Campbell, Shareholder Ogletree Deakins Atlanta Office margaret.campbell@ogletreedeakins.com www.ogletreedeakins.com

Lessons from Paradigm Capital and Important Trends to Watch The story of the Paradigm Capital case is the story of the evolving enforcement emphasis of the SEC and the direction of the developments in whistleblower law. It bears study by all employers, and particularly by those individuals involved in compliance on behalf of their companies. It is also important to note that although Paradigm Capital involves DoddFrank and particular financial industry regulations, other whistleblower protection laws appear to be following a similar course. Prudent employers will take the lessons from these developments and apply them as appropriate in their companies.

The SEC’s action in Paradigm Capital sends a clear message to employers: it will exercise its authority to bring anti-retaliation enforcement actions where it believes there is a violation of the law. Every year since the formation of the OWB, the SEC has received more tips from whistleblowers than in the preceding year. The SEC clearly sees whistleblower retaliation enforcement actions as one means of protecting this pipeline of tips, which it considers essential to its enforcement mission. In a press release accompanying the June 16, 2014 Paradigm Capital order, Mr. McKessy stated that the SEC “will continue to exercise [its] anti-retaliation authority in these and other types of situations where a whistleblower is wrongfully targeted for doing the right thing and reporting a possible securities law violation.”

Mr. Ceresney warned that “[t]hose who might consider punishing whistleblowers should realize that such retaliation, in any form, is unacceptable.”

Congress, the courts, and agencies have signaled generally that the laws protecting whistleblowers will be given maximum effect.

3725 Champion Hills Dr. Suite 2300 Memphis, TN 38125 901-683-4320 www.thecentregroup.com info@thecentregroup.com

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23

Plaintiff’s Testimony Disputing the Veracity of His Timesheets Precludes Summary

Stay Out of Timekeeping Trouble:

C

Best Practices for Preventing FLSA Claims

By MARY C. HAMM

reating or altering a timesheet without an employee’s consent is a very risky practice. An employer learned this lesson through litigation in a recent case decided by the Sixth Circuit Court of Appeals. Moran v. Al Basit LLC, 788 F.3d

Best Practices

201 (6th Cir. 2015). Plaintiff Jeffrey Moran worked as a mechanic at an auto

So when is a court likely to find that an employee’s timesheets are not objective evidence of the hours he worked? When the employee had no opportunity to assist in the recording or verifying of the hours. Employers can minimize the risk of lawsuits based on allegations of inaccurate timesheets by doing the following:

shop in Warren, Michigan. Defendants Al Basit LLC, Al Ghani LLC, Zain Syed,

and Zohaib Syed owned and operated the auto shop. Moran alleged that at the time he was hired, Zohaib Syed agreed to pay him $300 a week in addition to “bonus type profit sharing” in exchange for working six days a week.

Allegations of Failure to Pay Overtime According to Moran, he worked an average of sixty-five to sixty-eight hours a week for $300 per week, plus “a little extra money” on a few occasions. Moran testified that he worked from 7:30 a.m. until 6:30 p.m. or 7:00 p.m. on weekdays and from 7:30 a.m. until 4:30 p.m. or 5:00 p.m. on Saturdays. Moran alleged that his manager, John Blue, let him into the auto shop each morning because he did not have his own key. Moran claimed that Zohaib Syed never visited the auto shop and that Zain Syed only came in on Wednesday afternoons. During Moran’s twenty-one month employment, he complained several times regarding overtime and pay. In April 2013, after an argument in which the defendants refused Moran’s request for overtime pay, Moran did not return to work. Moran filed suit claiming that the defendants failed to properly compensate him for overtime work in violation of §207 of the Fair Labor Standards Act (“FLSA”), and terminated him in retaliation for requesting overtime compensation in violation of §215 of the FLSA.

Employer’s Response: Plaintiff’s Timesheets Show He Worked Exactly Thirty Hours a Week In response to Moran’s allegations, the defendants submitted Moran’s paystubs and timesheets, which showed that Moran never worked more than thirty hours a week. In fact, in all but five of the ninety timesheets submitted by the defendants, Moran worked “exactly thirty hours a week, despite his schedule varying notably from week to week.” Id. This level of precision was not lost on the court. Defendant Zain Syed claimed that he tracked his employees’ starting and stopping times each workday by reviewing security camera footage of their arrival and departure times. Syed claimed that he wrote these times on pieces of paper, which he subsequently discarded. The defendants also submitted the affidavit of John Blue, in which he testified that Moran never worked over thirty hours per week.

The defendants moved for summary judgment arguing that the timesheets indicated that Moran had been properly compensated for thirty hours of work and that Moran’s testimony to the contrary could not create a genuine issue of material fact. The district court agreed and granted summary judgment on both of his claims. Moran appealed the grant of summary judgment on his overtime claim.

24

On appeal, the Sixth Circuit posited the following question: “Where Plaintiff has presented no other evidence, is Plaintiff’s testimony sufficient to defeat Defendant’s motion for summary judgment?” Moran, 788 F.3d at 205. The court held that it is. Moran disputed the defendants’ claim that they had properly recorded his hours on handwritten sheets. Moran also claimed that the defendants had given him permission to work overtime hours. Although Moran’s testimony about the hours and days he worked lacked “precision,” it was sufficient to create a genuine issue of material fact as to whether his employer paid him overtime as required by the FLSA. The court rejected the defendants’ argument that Moran’s testimony was inconsistent with the “allegedly contemporaneous” timesheets provided by the defendants and found that they “do not amount to objective incontrovertible evidence of Plaintiff’s hours worked.” Id. What’s next for this employer? The defendants must return to the trial court to allow a jury to decide whose version of the hours worked, the defendants’ or the plaintiff’s, is the most credible.

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• Create a system under which every employee verifies the time he or she worked each day. This applies even if employees record their time electronically because employees should electronically sign and verify their time records.

• Ensure that supervisors and other management personnel are properly instructing employees on how to record their time. If you have a manager who is improperly requiring employees to record less time than the employee actually worked, you will have another FLSA violation on your hands.

• Promote an open-door policy for reporting errors on time records. Designate someone in your company who is not a direct supervisor to whom any employee can report these issues. Describe this procedure in your employee handbook.

By putting these protections in place, if ever faced with the type of lawsuit brought by Mr. Moran, your company can present evidence of the hours the employee worked, demonstrate that the employee approved the total number of hours worked, and maintain that you took reasonable steps to prevent any errors.

Mary C. Hamm, Attorney Burch, Porter & Johnson, PLLC mhamm@bpjlaw.com www.bpjlaw.com

23rd Annual

Chattanooga, TN October 7-9, 2015

Tennessee SHRM

REGISTER NOW!

SPACE IS LIMITED

Conference and Exposition We welcome you to be a part of the 23rd Annual Tennessee SHRM Conference and Exposition that will be hosted by the SHRM Chattanooga Chapter, an affiliate chapter of the Society for Human Resource Management. This exciting, educational event will afford attendees the opportunity to learn and network with over 600 HR professionals from across the state and surrounding areas.

Dan Pink

Thurs., Oct. 8th General Session

Jake Greene

Steve Gilliland

Chip Madera

General Session

General Session

General Session

Thurs., Oct. 8th

Fri., Oct. 9th

Fri., Oct. 9th

The theme of the conference has allowed for the development of keynotes and sessions that will truly educate attendees. This year's event will embrace all the emerging trends that impact HR professionals. As an attendee you will have the opportunity to visit with over 100 exhibitors that will display their company's latest products and services oriented toward the needs of the HR Professional. And, we haven't forgotten to add in some fun with receptions and social events!

We are pleased to be serving as your conference committee and happy to bring you this exceptional Conference.

Frances Flowers, SPHR Conference Co-Chair

Valerie Gifford, SHRM-SCP, SPHR, CEBS Conference Co-Chair

www.HRProfessionalsMagazine.com

25

Title VII Does Not Recognize Discrimination Based on Sexual Orientation

In

light of the recent Supreme Court decision in Obergefell v. Hodges, the issue of sexual orientation has returned to the front burner of the American public’s consciousness as the hot-button issue of 2015. Just hours following the release of the Court’s decision, a single scroll through one’s Facebook newsfeed was likely to provide dozens of highly thoughtful critiques from the many amateur constitutional scholars that populate the internet. All critiques aside, same-sex marriage has been made legal in all fifty states. Bizarrely enough, however, in the 28 states that do not have explicit bans on workplace sexual-orientation discrimination, a person can still be fired simply for being homosexual. As an HR professional, one would be prudent to anticipate that this decision is sure to bring about more change in how sexual orientation is treated, especially in the workplace.

After the Obergefell decision, it would be easy to think that sexual orientation is in the fast-lane to becoming a class that is protected against all types of workplace discrimination. Interestingly enough, it’s actually kind of a toss-up at this point.

Let’s examine two opinions recently issued by the Seventh Circuit Court of Appeals and the Equal Employment Opportunity Commission (EEOC) that indicate a split on this issue, and that further illustrate just how cloudy these waters are.

By JESS SWEERE

Unfortunately, Mr. Muhammad not only dealt with slurs, but also racially insensitive and homophobic graffiti. However, the Court’s opinion points out that Caterpillar was quick to respond as soon as Mr. Muhammad complained of the graffiti.

When Mr. Muhammad eventually asserted claims against Caterpillar for sexual harassment and creating a hostile work environment, it was Caterpillar’s prompt response to each complaint from Mr. Muhammad that helped it prevail. The Seventh Circuit affirmed a decision by the district court to grant summary judgment to Caterpillar on the sexual harassment claim, stating: “ In rejecting the claim of sexual harassment, the court relied on our decision in Spearman v. Ford Motor Company, which held that the Title VII prohibition on discrimination based on sex extended only to discrimination based on a person's gender, and not that aimed at a person's sexual orientation. The district court also ruled that Caterpillar was not liable for any racial harassment by coworkers because, in the court's view,

The Seventh Circuit’s 2014 Decision in Muhammad v. Caterpillar

the company's responses to Muhammad's complaints

In Muhammad v. Caterpillar, Inc., the plaintiff was subjected to terrible racial and homophobic slurs by many of his coworkers. However, each time he complained to management, the company responded. The Seventh Circuit’s opinion illustrates how Caterpillar responded to Mr. Muhammad’s complaints:

concluded that Muhammad lacked evidence that

“ In the first incident, a coworker called Muhammad a [racial

sexual and racial harassment: Caterpillar reasonably

26

of harassment were reasonable. Finally, the court Edwards retaliated against him for complaining about the harassment….Another more fundamental obstacle blocks Muhammad’s claim that Caterpillar is liable for

slur]. Muhammad complained to human resources. After

responded

the complaint, that employee never made any further racial

Muhammad reported to Caterpillar his coworkers’

comments to Muhammad. A different coworker stated that he

offensive comments and the company responded, only

did not like Muhammad’s [homophobic slur], and Muhammad

one of the coworkers made another similar remark….

reported the statement to his supervisor, Kipp Edwards, who

As for the graffiti, Caterpillar responded quickly each

brought the complaint to human resources. Muhammad had no

time Muhammad reported it, and it soon stopped the

subsequent problems with that employee.”

problem permanently.” (emphasis added)

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to

Muhammad’s

complaints….After

The Seventh Circuit held that Caterpillar took reasonable efforts to ensure that the harassment did not repeat itself. Although Mr. Muhammad had to endure this contemptuous behavior multiple times, each time Caterpillar’s response was reasonable.

Employer Takeaways from Muhammad Being an HR professional, the two major takeaways from the Seventh Circuit’s holding here are that (1) discrimination based upon sexual orientation is not prohibited by Title VII; and (2) if an employee of your company is treated in a manner similar to this, the company must respond in a prompt and reasonable manner to avoid liability. Now let’s look at the other side of the coin with the EEOC’s opinion in Baldwin v. Foxx.

The EEOC Weighs In In Baldwin v. Foxx, the complainant believed that he was passed over for a permanent position as an air traffic controller because he was homosexual.

Further, he alleged that his supervisors repeatedly made homophobic comments about him.

Historically, like in Muhammad v. Caterpillar, federal courts have consistently held that Title VII does not extend to sexual orientation discrimination claims because “sexual orientation” is not listed anywhere in the statute or even mentioned in its legislative history. However, the EEOC saw things differently, and reasoned that such discrimination is a prohibited form of sex discrimination, which is prohibited by Title VII. The EEOC’s opinion went on to say that allegations of discrimination based upon sexual orientation indeed create a viable claim under Title VII. The EEOC opinion relied upon three rationales for reaching its conclusion.

The opinion stated that an employee could show that the sexual orientation discrimination he or she experienced was sex discrimination because (1) it involved treatment that would not have occurred but for the individual’s sex; (2) because it was based upon the sex of the person or persons with whom the individual associated; and/or (3) because it was premised on the fundamental sex stereotype, norm or expectation that individuals should be attracted only to those of the opposite sex. In short, the EEOC’s reasoning is that if a male employee was to marry another man, and gets fired as a result, where a similarly situated female employee would have not been fired for also marrying a man, then a viable claim for discrimination would exist.

How the EEOC’s Decision Should be Interpreted Moving Forward Although rulings made by the EEOC dictate the rights of most federal workers, they are not binding in the private sector. However, courts and many HR professionals look to the EEOC for guidance on matters of employment discrimination. The Baldwin opinion directed all EEOC agencies to treat claims of sexual orientation discrimination as claims of sex discrimination under Title VII. As an HR professional, although it is smart to be aware of this split in opinion moving forward, it would also be wise to examine your company’s HR policies and procedures to ensure that the best mechanisms are in place in order to foster an inclusive and non-discriminatory workplace environment.

Jess Sweere, Director Cross, Gunter, Witherspoon & Galchus, P.C jsweere@cgwg.com www.cgwg.com www.HRProfessionalsMagazine.com

27

Are You Ready for a “Modernized” and “Simplified” FLSA?

Suppose you have a Payroll Manager who clearly falls under the Administrative exemption and is currently paid $45,000 on a salary basis.

Under the proposed regulations, this job does not pass the salary level test and would be nonexempt. Here are some questions to consider:

• Would it be more cost effective to increase the incumbent’s salary to meet the salary threshold of $50,440?

President Franklin D. Roosevelt signed the Fair Labor Standards Act (FLSA) on June 28, 1938 as part of his New Deal legislation. The Act had a far-reaching impact on American workers then and still does today. From 1938 through 1975, the salary threshold was adjusted only seven times. In 2004, the salary threshold increased for the first time since 1975 to $455 per week, where it remains today.

• What happens when the federal salary threshold goes up again?

• What impact does the changed status have on the incumbent’s benefits package?

• What impact will the status change have on the incumbent’s morale?

Scenario 2

On July 6, 2015, the Department of Labor, in response to President Obama’s Presidential Memorandum to modernize and simplify the regulations, issued proposed regulations to update the existing protections of the FLSA and to simplify the rules to make them easier to understand and apply. These proposed regulations are being discussed everywhere, even in the mainstream media, and have employers scratching their heads.

The most significant proposed change in the regulations is to establish the threshold for the salary level test at either the 40th percentile of earnings for full-time salaried workers or the CPI-U. Following is a comparison of the current and proposed salary thresholds.

Current Regulations Proposed Regulations $455/week $970/week $23,660/year $50,440/year (same since 2004)

( expected 40th percentile in 2016)

(The DOL is also requesting comments regarding the duties test, but has not made any specific recommendations to change the duties test.)

Based on what we know today, what can we do NOW to prepare for the eventual implementation of the proposed regulations?

1. As always, make sure your jobs are properly categorized according to the current regulations.

• Can you define the exemption category under which each of your exempt jobs fall?

• Do your exempt jobs meet the duties test of the FLSA? 2. Identify your company policies that are based on the exempt status of your jobs, such as paid time off policies or disability benefits. When the FLSA was first enacted, the exemptions were based on the assumption that workers in exempt jobs were entitled to privileges meant to offset the inconvenience of working long hours, such as more flexible work schedules, additional fringe benefits, and even better opportunities for advancement.

Now is a good time to evaluate your organization’s strategy in this regard.

3. Review your current salaries and/or wage and salary ranges. The proposed threshold for the salary level test is nearly two times the current threshold, which makes it likely that some of your currently exempt jobs may soon fall below the threshold and would, therefore, fail the salary level test. How will your organization handle these issues?

28

Scenario 1

• Does the incumbent routinely work more than 40 hours per week?

You’ll have to pay overtime.

By JENNIFER BLAKE

Salary threshold for salary level test:

Following are some likely scenarios to get you thinking about your workplace and what questions you should be asking.

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You have a group of Office Managers who are paid on a salary basis and clearly pass the duties test under the Executive exemption. Your salary range for the job is $36,200 to $54,300. You have five incumbents, three who are paid below the new salary threshold and two who are paid above.

• Do you make the job nonexempt and pay all five incumbents overtime?

• Do you increase the salaries of the three who fall below the salary threshold so they can pass the salary level test?

• What happens to internal pay equity within this job group if you increase the three employees’ salaries?

• Do you pay three incumbents on a nonexempt basis, changing their benefits status, having them submit regular timecards, and paying them overtime for hours over 40? What about the other two incumbents? Do they remain “exempt” without the opportunity to earn overtime pay?

If you’re facing the probability of a large group of employees becoming nonexempt and their worked hours vary from week to week, you might consider paying them a fixed salary. This is permissible under Section 778.114 of the current Regulations. You will still pay such an employee overtime, but you’ll calculate the employee’s regular rate of pay by dividing his or her weekly fixed salary by the number of hours worked in the week. (The calculated “regular rate” must be no less than minimum wage.) Overtime is then calculated as one-half the employee’s regular pay rate and is paid for all worked hours in excess of 40. (Review this section of the Regulations at http://bit.ly/1MSUJ7q.)

The DOL has requested comments from the public up until September 4, 2015. After that, most experts agree it will be at least several months before the final regulations are issued, most likely sometime in 2016.

To quote Orrin Woodward, a NY Times bestselling author of leadership books, “The more prepared you are, the less pressure you feel.” Now is the time to assess the potential impact on your organization and to begin planning for the implementation of the “new and improved” FLSA.

Jennifer Blake, CCP The Centre Group jblake@TheCentreGroup.com www.TheCentreGroup.com

A Book Review

- Hallelujah! An Anthem for Purposeful Work

The story’s first chapter of “Crises” opens with a wonderful philosophical perspective. The chapter concludes with a testament; a summary of the crises Susan is experiencing, and then follows with common sense applications for the lessons learned. The book’s remaining chapters of Commit, Care, Challenge, Celebrate, Contribute, Connect, and Coda, each follow this same flow. The final pages of the book provide a logical and effective summation of each chapter’s principles that not only will readers appreciate, but anyone supervising others will as well.

The orderliness of the book has a wonderful dichotomy as it conforms to an academic curriculum while the story being told keeps the reader guessing at what comes next. Personally, I was not sure how three authors would maintain the singular perspective needed but a strong, first person account resulted and readers will not be disappointed. Its approach in teaching basic management and leadership rules were consistently maintained that apply within any size organization.

Those in the Human Resource and talent management field will certainly benefit from its simple and effective approach to problems encountered every day. Disengagement of workers, cynicism, poor morale, life issues, employees “not getting it,” mission statements that no longer relate, not achieving goals, not letting people take the lead, understanding the chains of command rather than embracing chains of purpose, and realizing what our responsibilities are to one another.

Hallelujah! An Anthem for Purposeful Work is well written and worth the short time it takes to read, digest, and apply.

By WILLIAM CARMICHAEL

Hallelujah! An Anthem for Purposeful Work by Cathy Fyock, Lyle Sussman, and Kevin Williamson, delivers a refreshing perspective on that four letter word called ‘work’ and the true meaning of one’s purpose ‘at work.’ The reader is drawn into the hurried world of the story’s heroine as she comes to terms with her own meaning of work and her place in it amidst a disengaged group of co-workers. Sound familiar? There certainly was a friendly familiarity to me.

And not just with the common issues and problems this young manager must come to terms with; but also with the reality that each of us can overcome disengagement with work if we just change our focus.

The book’s title may first generate a reaction of “Oh no, not another self-help book,” but first looks can often be deceiving as was the case for me. Interestingly though, self-help is exactly what it does by carefully weaving a fictional storyline around simple, common sense approaches to changing one’s outlook about their job, their role in any organization, and their co-workers. A quick read (only 104 pages), several themes quickly emerge that we all can identify with. For example, have you ever asked yourself the questions, “Why have I become so cynical at a job I was once so enthused about?” Or, “What is my purpose in this organization?”

Honestly, we all have and readers will not be disappointed by the book’s approach in dealing with these painful yet real questions.

The book’s characters, although fictional, quickly become real. I found myself cheering on Susan, the story’s protagonist as well as for Doug, her first boss who although supportive, is stuck in old methods for getting work out. For her husband Jason, a good supportive, listener. For co-workers that, although talented, lack the support, direction, or motivation to do more than the bare minimum. For her fellow choir members who each have problems of their own. And lastly, for Dan, the church choir director who helps Susan put her job, her life and faith, into perspective.

William Carmichael, Ed.D. Strayer University William.Carmichael@strayer.edu www.strayer.edu

Your Resource for Legal Innovation and Inspiration Customized Management Training Compliance Audits Policy and Strategy Analysis Litigation Defense Global Mobility Labor Negotiation www.bakerdonelson.com THIS IS AN ADVERTISEMENT. Ben Adams is Chairman and CEO of Baker Donelson and is located in our Memphis office, 165 Madison Avenue, Suite 2000, Memphis, TN 38103. Phone 901.526.2000. ©2015 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC

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29

The DOL’s New Economic Realities Test for

INDEPENDENT

CONTRACTORS

By MATTHEW R. COURTNER

In

recent years, the U.S. Department of Labor (“DOL”) has aggressively fought the misclassification of employees as independent contractors under the Fair Labor Standards Act (“FLSA”). Because employees are increasingly being misclassified, at least in DOL’s opinion, the DOL issued Administrator’s Interpretation 2015-1 (“Interpretation”) to clarify the FLSA’s test for determining whether a worker is an employee or

an independent contractor. The DOL believes this guidance will assist employers in properly classifying workers, thus reducing misclassification.

In deriving the ultimate inquiry, the DOL emphasized the FLSA’s broad definition of “employ”—that is, “to suffer or permit to work.” The inquiry is whether the worker is economically dependent on the employer or rather is operating his or her own business (i.e., economic independence). To this end, courts have developed the “economic realities” test, which is a multi-factor test that analyzes the worker’s degree of economic independence. The DOL integrated these concepts, concluding that “[a] worker who is economically dependent on an employer is suffered or permitted to work by the employer.” Therefore, relying on this broad interpretation, the DOL opines that “most workers are employees under the FLSA.” In the Interpretation, the DOL outlined the six factors to be applied under the economic realities test. The DOL repeatedly emphasized that this test is applied as a whole, with no one factor being dispositive. And the test should not be applied “mechanically,” but rather within the broader concept of economic dependence. That is, instead of counting the factors or using them as a checklist, the intent is “to determine whether the worker is economically dependent on the employer (an thus its employee) or is really in business for him or herself (and thus its an independent contractor).”

FACTOR 1: Is the Work an Integral Part of the Employer’s Business?

The more “integral” the work is to the employer’s business, the more likely the worker is not economically independent. In other words, an independent contractor’s work is less likely to be integral to the employer’s business.

30

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FACTOR 2:

Does the Worker’s Managerial Skill Affect the Worker’s Opportunity for Profit or Loss?

This factor examines what impact, if any, the worker’s managerial skills have on profits and losses. If the worker is truly economically independent, the worker should have the opportunity to experience both profits and losses. The ability to suffer a loss tends to favor an independent contractor relationship. This factor generally excludes the ability to work more hours and the availability of additional work. These characteristics are usually unhelpful because the ability to make more money is the same in either relationship.

FACTOR 3:

How Does the Worker’s Relative Investment Compare to the Employer’s Investment?

The worker’s overall investment should be compared to that of the employer. A worker’s investment, as well as the accompanying risk for loss, tends to indicate that the worker is economically independent. The size of the investment, however, is critical. A minor investment by the worker, for example, indicates that the employer and worker are not comparable; as a result, it is more likely that the worker is economically dependent on the employer. The investment is evaluated as a whole instead of in isolation.

FACTOR 4:

Does the Work Performed Require Special Skill and Initiative?

This factor examines the worker’s business skills and initiative—not technical skills. Specialized, technical skills are not indicative of independence.

A worker may have specialized skill as a carpenter, but the worker’s skills are in the work performed,

not in business skills, judgment, and initiative. To indicate independence, the worker needs to use his skills in a distinct, business-like manner (i.e., operate as an independent business).

FACTOR 5:

Is the Relationship between the Worker and the Employer Permanent or Indefinite?

A permanent, indefinite term of employment suggests that the worker is an employee, while a lack of permanency or indefiniteness suggests an independent contractor relationship. According to the DOL, a working relationship of weeks or months suggests permanency/indefiniteness, as an independent contractor usually only works on a single project instead of repeatedly working for the same employer. But the lack of permanency/indefiniteness does not per se indicate an independent contractor relationship; instead, the reason for the lack of permanency/indefiniteness must be examined to determine whether it is a result of “‘operational characteristics intrinsic to the industry’” (i.e., employee) or of the worker’s “own independent business initiative” (i.e., independent contractor).

PERFECT ALIGNMENT. Relationship. Reliability. Respect.

At the center of our Employee Benefits and Labor & Employment practices.

FACTOR 6:

What is the Nature and Degree of the Employer’s Control?

This factor examines whether the worker has independence from the employer. The inquiry is on whether the employee sufficiently controls the work performed so that the worker is operating his or her own business.

And context matters. For example, if the worker works from home, the employer should exercise less control. Because control is the key factor in the common law test, the DOL cautions that, under the FLSA, this factor does not carry more weight than any of the other factors. That is, even if the necessary control is absent, a worker may still be an employee if the other factors establish a lack of economic independence.

In sum, the DOL did not set forth a new test. Rather, the DOL merged the FLSA’s broad “suffer or permit to work” definition into the economic realities test, asserting that the key inquiry is whether or not the worker is economically dependent from the employer. This is a continuation of the DOL’s disfavor for the use of independent contractors. The DOL’s broad interpretation is aimed at restricting the use of independent contractors and, in turn, the reclassification of workers as employees. Thus, the Interpretation indicates that the DOL will continue, if not even increase its efforts, to challenge employer’s independent contractor classifications.

If the DOL’s interpretation is correct and most independent contractors are employees, employers will be significantly impacted. For example, workers once classified as independent contractors would be entitled to the FLSA’s minimum wage and overtime protections and may be entitled health insurance, retirement contributions, and workers’ compensation coverage.

And employers would have tax withholding and social security payment obligations. As a result, employers who use independent contractors should examine the economic dependence of each worker to ensure that it has properly classified it workers.

A copy of the Interpretation can be found at: www.dol.gov/whd/workers/misclassification/AI-2015_1.htm.

N A S H V I L L E K N O X V I L L E M E M P H I S W A S H I N G T O N D C bassberry.com Blog: bassberrylabortalk.com

@BassBerryLabor

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31

EEOC Celebrates

50th Anniversary

During the first year of operation, it was projected EEOC would receive about 2,000 charges. Actually 8,852 charges were received. So a backlog of charges was created in the first year of agency operation.

By KATHARINE KORES

R-L: Audrey Bonner, Enforcement Manager William Brown, Enforcement Supervisor Gerald Thornton, Supervisory Trial Attorney Katharine Kores, District Director Faye Williams, Regional Attorney Karen Johnson, Enforcement Supervisor

J

uly 2015 was a month of celebration for the EEOC. July 2, 2015 marked the 50th anniversary of the day EEOC opened its doors. July 26, 2015 marked 25 years since the passage of the Americans with Disabilities Act of 1990.

A Toothless Tiger Helps Shape the Law and Educate the Public The Civil Rights Act of 1964 became effective on July 2, 1965 establishing EEOC against a background of massive social change in America. EEOC had a budget of $2.25 million and a staff of about 100 employees many of whom were detailed from other Federal agencies. It was set up in temporary, borrowed space in the basement of the U.S. Department of Commerce in Washington, DC. EEOC’s primary responsibility was to receive and investigate charges of unlawful employment practices. It was to determine if reasonable cause existed to believe the charge was true and if it was determined that a violation had occurred – attempt to reach a voluntary settlement of the case through conciliation.

It was widely considered a Toothless Tiger. It had no authority to bring lawsuits. It had no cease and desist authority. Private individuals could file lawsuits on their own behalf. EEOC could recommend to the U.S. Department of Justice to bring pattern and practice lawsuits. With such limited tools, a big question for EEOC was - what could it do to be effective in eradicating employment discrimination?

It is important to remember things were different in 1965 than they are now. A bi-partisan coalition was responsible for the passage of the Civil Rights Act of 1964. Public opinion was strongly in favor of civil rights. Blatant discrimination was widespread but not condoned by much of the American public. Against this background, many American employers were willing to make voluntary changes.

EEOC had much work to do. In addition to the very basic need to devise a filing system for complaints, it needed to develop procedural and substantive parameters of the law.

The law needed to be interpreted. What is the basic definition of discrimination? How do you prove discrimination? What remedies are available? The agency hit the ground running with the issuance of decisions and guidances. Conciliations were also used in the early years to address egregious employment practices such as desegregating employers’ facilities, obtaining equal pay for Black and White workers doing the same jobs and allowing Black employees to participate in apprenticeship programs which would enable them to advance in the workplace.

Starting in the very early years, EEOC assisted private Title VII litigants by participating in their cases as Amicus. For example, the EEOC filed Amicus briefs in Griggs v. Duke Power and McDonnell Douglas v. Green, the seminal cases for the disparate impact and disparate treatment theories of discrimination, respectively.

EEOC also emphasized outreach, education and technical assistance. The Commission had hearings between 1967 and 1971 which focused on particular industries, and 32

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particular types of jobs and documented discrimination in various industries and the total lack of Black employees in some companies.

In addition to hearings, EEOC Commissioners and staff gave 600 speeches in the first year and worked with industry to educate employers regarding their legal obligations under Title VII. EEOC’s focus on Outreach and Technical Assistance has continued throughout its entire 50 years.

The Toothless Tiger Gets its Teeth – A New Era of Enforcement The Equal Employment Opportunity Act of 1972 – commonly called the 1972 Amendments - provided the EEOC litigation authority to back up its administrative findings. It also expanded Title VII jurisdiction to smaller employers, educational institutions and state and local governments and increased the time for filing charges. In order to address its charge backlog, the EEOC created its rapid charge processing system.

The late 1970s continued to see changes which expanded the EEOC’s potential for addressing employment discrimination. The Pregnancy Discrimination Act of 1978 was Congress’s response to the Supreme Court’s holding in General Electric v. Gilbert. Congress adopted the EEOC’s position that pregnancy discrimination constitutes sex-based discrimination. In 1979, enforcement authority for the Equal Pay Act and the Age Discrimination in Employment Act were transferred to EEOC. Congress amended Title VII again with the Civil Rights Act of 1991 which came in response to and largely overruled about seven Supreme Court cases which were decided in the late 1980s. The major provisions of this law were the codification of the disparate impact and mixed motive theories and the availability of jury trials and compensatory and punitive damages in cases of intentional discrimination.

At about the same time, the Americans with Disabilities Act (ADA) of 1990 was signed into law by President George H.W. Bush. The ADA is one of the most comprehensive pieces of civil rights legislation prohibiting discrimination and guaranteeing people with disabilities the same opportunities as everyone else to participate in the mainstream of American life – to enjoy employment opportunities, to purchase goods and services and to participate in State and local government programs and services. Title I, the employment title, is enforced by the EEOC. Disability charges comprised about 28 percent of the EEOC’s caseload in 2014 involving a broad group of physical and mental disabilities.

50 Years Later – Challenges Remain While EEOC offices across the country celebrate these significant anniversaries, there is still much work to be done. In its Strategic Plan of 2012, the EEOC committed to its mission to stop and remedy unlawful employment discrimination through strategic law enforcement, education and outreach and efficiently serving the public. In an effort to focus its resources, the EEOC recently identified six enforcement priorities in its Strategic Enforcement Plan. Several of these priorities including barriers to hiring, harassment and retaliation, represent persistent problems. Today the EEOC has more than 2,000 employees and a budget of more than $300 million. The challenge is to utilize these resources to continue to build on EEOC’s 50 years of progress in eradicating employment discrimination.

Katharine W. Kores District Director Equal Employment Opportunity Commission Memphis District Office Katharine.kores@eeoc.gov

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whether it’s the unsecure transfer of sensitive files or the loss of a mobile device holding company or personal information—is often cited as one of the primary reasons data breaches occur. And when more than 800,000 laptops, tablets, smartphones, and USB drives are lost or stolen annually in airports alone, and which are often carrying information synced from work computers via the cloud, it’s easy to see why it’s essential to take cloud security seriously.

–if you use it correctly

By ASAF CIDON

In

an era where everything is done on the Internet, keeping personal information secure can be tricky for HR professionals. After all, from social security numbers to home addresses to bank account numbers, those working in HR deal with a veritable treasure trove of information for cyber

attackers. And as more and more information is transmitted via email or stored in the cloud, security becomes increasingly tricky—yet increasingly paramount.

Why we’re using the cloud—and why it can be risky Nearly 90 percent of businesses currently use the cloud in some capacity—a number that’s only expected to grow, especially as workplaces emphasize collaboration and employees increasingly do work beyond the walls of the office to boost productivity. What’s more, employees are using the cloud whether their employers want them to or not: An astonishing 80 percent of employees around the country use unapproved software at work. And it’s no surprise the cloud is on the rise: Syncing files across mobile devices, sharing across folders, and accessing files from anywhere are all a boon to productivity.

But the cloud can be a nightmare from an HR standpoint, especially if the software isn’t companysanctioned, a situation that leaves employers with little control over how secure any of the sensitive data really is.

For instance, consider the iCloud folder an assistant might use to store freelancers’ W-9s that are emailed to him before he passes them on to HR; if iCloud suffers a data breach, those social security numbers are hackers’ for the taking. And if that employee loses his smartphone, which has synced his iCloud data, that’s a potentially devastating exposure. Or else, think of the employees who want to switch to direct deposit and simply email their routing numbers to the HR department. Given the weak security associated with email, this important data is ripe for theft as well.

In short, there are an infinite number of scenarios in which personal information gets sent around the Internet in unsecure ways. And the truth is that data breaches are on the rise: From 2013 to 2014, the number of breaches in the United States increased by 10 percent, and the number of people affected by each breach also rose dramatically.

None of the above examples show employees doing anything malicious, but they illustrate the everyday hazards that come with keeping sensitive information accessible. Employee negligence— 34

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Staying safe in the cloud The confluence of increasing cloud usage and rising cyberattacks might seem alarming—in fact, a data breach seems nearly inevitable. But the cloud is actually much safer than legacy network systems, which rely on outdated firewalls, ineffective database encryption, and the assumption that work stays in the office.

Just think about the major corporate breaches of late: They’ve all been the result of weak on-premise defenses.

Luckily, there are a number of precautions HR departments can take to safeguard themselves against the inadvertent release of employees’ personal information. Here are a few tips for keeping information safe in the cloud.

Embrace the cloud. We already know that employees are using the cloud more and more, and that’s because it’s simple, convenient, and in line with what they’re using in their personal lives. When it comes to paperwork, the path of least resistance is essential to keep your workflow running smoothly. Rather than expecting people to use secure portals to retrieve sensitive documents, or asking contractors to send you paperwork via fax or snail mail, understand that they’ll want to use email or they’ll want to use the cloud, and even more so if they live abroad. If you make it easy for your employees and contractors to get you the necessary information, your job will be easier, too. What’s more, formally adopting the cloud keeps control in the hands of your business, so you can educate your employees about leveraging it responsibly.

Encrypt your files. The key to using the cloud securely is encrypting your files before they ever reach the cloud. If you do that, the files will stay encrypted even if they get synced or shared, and only authorized parties have the power to decrypt them. That means that even if the cloud provider gets hacked, the encrypted files will remain that way, since the hacker won’t be authorized to see them. But be careful: not all encryption is created equal. Some encryption services don’t encrypt the data itself, and instead

provide encryption when it’s stored in a certain place, such as on the cloud solution’s servers. That means the encryption protection disappears as soon as the file is synced to something like a device. So do your homework to find the kind of file-level encryption that will protect your files to the highest degree.

Use a system of shared folders. Many encryption services work seamlessly with existing popular cloud providers, like Dropbox or Google Drive. What that means for you is that you can encrypt entire folders within those programs; no one has to learn to use yet another program or change their work methods in any way. Sharing encrypted folders within the HR department, for instance, means all sensitive documents can be safely stored in one place, encrypted before they reach the cloud, and easily retrieved. Folders can also be shared with other employees or third parties you work with frequently.

Send (and receive) secure email. It’s one thing to secure files once they’re already in your possession, but email is a treacherous place, especially for sensitive information. Ask your employees, third parties, and even customers to send you files directly into your encrypted folders, which ensures that they won’t be intercepted on their way over, won’t be vulnerable to an email breach, and will land exactly where you need them.

Change your passwords. It should go without saying that even if you’re encrypting your files, you shouldn’t let the most basic precautions slide. Changing passwords often is still one of the most important ways to protect yourself from breaches, in part because user names and passwords remain the primary way to identify accounts online. And make sure you and your employees are using unique passwords for your email, cloud provider, encryption service, and personal accounts. After all, password reuse is a major factor in recent data breaches, but it’s one of the easiest ones to prevent.

Manage access to files. If you oversee a staff, odds are not everyone needs access to all the sensitive files. Make sure you’re granting access to them on a need-to-know basis; the fewer people handling information a cyberattacker might want, the smaller the odds of employee negligence, a misplaced files, or a misaddressed email.

The cloud is inevitable, and security should be too If there’s anything to be learned from Sony, Target, Premera, UCLA, and the rest of the spate of data breaches in the news lately, it’s that these companies aren’t using the cloud to store their sensitive files, and they’re not encrypting their data. These highprofile cases show that even the biggest businesses aren’t immune to a data breach, and that the status quo in file storage and security is clearly no longer effective.

More and more companies are making the smart move toward embracing the cloud, but it’s vital to take the necessary precautions when doing so. There’s nothing more important than protecting employees’ and clients’ personal information. Adopting the cloud and encrypting files on the regular are a great place to start.

Asaf Cidon, CEO Sookasa www.sookasa.com

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evolving business Bingham Greenebaum Doll LLP works closely with its clients to help them achieve business goals in the region and around the world.

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The Legal Challenges of Telecommuting

Discrimination

By CHRIS ANDERSON

Employers should be careful to avoid the stereotype that older workers are less suitable for telecommuting because they lack the ability to manage the technological demands of working remotely. Employers should also train managers and human resource professionals to avoid gender stereotyping that can result in discriminatory selections for telecommuting. For example, managers may assume that mothers will be less productive at home because they are preoccupied with their childcare responsibilities or that females prefer to work at home more than their male counterparts. Such perceptions may result in the company having to respond to an administrative charge or lawsuit alleging discrimination.

Telecommuting is big and getting bigger. By some estimates, nearly 63 million people, or 40 percent of the workforce, will work from home by the end of 2016. The availability of broadband, laptops, smart phones and tablets allows employees to work virtually anywhere at any time. Inflexible work schedules and static office space are relics of the pre-Wi-Fi era. Workers can generate and develop ideas almost anywhere. Companies who understand and embrace this transformation have realized that telecommuting can benefit the bottom line as well. Fewer employees on company property mean less office space and lower overhead. Happy employees are healthy employees, leading to higher production, increased revenue and lower health care costs. Increased fuel savings, environmental benefits and expanded customer service may be additional value added from telecommuting. While there are many reasons why telecommuting is rapidly becoming the “new normal,” employers need to understand the legal implications of this shift in how, when and where employees work.

Issues involving wage and hour compliance (for non-exempt employees), worker’s compensation, and discrimination, are three areas of legal risk that employers need to address when implementing telecommuter programs.

Wage and Hour State and federal wage and hour laws apply to telecommuters. Employers must pay telecommuters who are non-exempt minimum wage and overtime and provide them mandatory meal breaks and rest periods, if required by state or local laws. To ensure that employees are properly paid, employers should establish work schedules and insist that telecommuters keep an accurate record of all hours worked. To monitor working time and ensure that telecommuters are not working during meal breaks, employers should consider having employees turn off their phones, log off their computers, or notify a supervisor when they “clock in” and “clock out” for their meal breaks.

Most employers understand that home-to-work travel is not compensable. But, what if the employee rarely comes to the office or does not commute to the office at all? Is the employee’s drive to the office compensable? Maybe. If the telecommuter’s remote workplace is the employee's main worksite, then travel to and from the company’s office may be compensable because the employee has to travel to a distant worksite. Also, travel time during the workday is compensable. So, if a telecommuter starts the workday at home and then drives to the office, the travel time is generally compensable as it represents travel time between two work locations.

Worker’s Compensation Can an employer be responsible for a telecommuter’s injury even when the employer does not have any control over the physical environment? The answer is yes. If an injury is work-related, it is compensable under workers’ compensation without regard to where it occurred because employers have the same obligation to provide a safe environment for telecommuters as they do for employees who work on company property. For an injury to be compensable, the employee must merely be acting in the interest of the employer at the time the injury occurred. So, how can an employer limit exposure to worker's compensation claims from telecommuters? Consider establishing clear guidelines for a home office to ensure that telecommuters have a designated work area free from obvious safety hazards. Also consider conducting periodic visits to the employee's home office to ensure that it complies with the company's guidelines and safety standards. While unannounced visits can engender distrust and damage employee morale, calling 30 minutes ahead gives the employee a chance to "tidy up" without providing too much time to change the work area in any substantial way. Lastly, requiring employees to notify management when they take a meal break may help employers determine if an injury is work-related.

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EEO issues are always a concern for employers, but telecommuting presents some unique challenges in this regard. In short, employers cannot exhibit a bias against any protected class when offering employees the opportunity to telecommute.

Employers must be careful to avoid stereotyping and outmoded assumptions that can often influence the process to select employees for telecommuting.

Telecommuting can be an appropriate accommodation for a disabled employee. Remember, however, that the ADA does not require an employer to allow telecommuting if it imposes an undue burden or if the employee cannot perform the essential functions of the position from home. To determine whether telecommuting is an appropriate accommodation, employers should ask:

o Is face-to-face contact with coworkers or customers necessary? o Is close coordination with other employees necessary? o Is immediate access to information or documents in the workplace needed? o Can the employee be supervised effectively at home? o Can the equipment necessary for the employee's job be used at home?

If these factors weigh against allowing a disabled employee to work from home, the ADA does not require telecommuting as an accommodation. Moreover, there may be alternative accommodations that address the employee's needs. The ADA allows employers to select any effective accommodation, even if it is not the one requested by the employee.

Lastly, employers should consider implementing a carefully prepared telecommuting policy and may want to require telecommuters to sign an agreement addressing work schedule, job-related injuries and the establishment of a designated and safe workplace. Implementing a clear policy and securing signed agreements can help employees to have a clear understanding of their obligations and may mitigate the employer’s risks in this fluid and constantly changing virtual workplace.

Chris Anderson, Shareholder Littler Mendelson Nashville chrisanderson@littler.com www.littler.com

Company Fined $605,000 for I-9 Paperwork Violations

By BRUCE E. BUCHANAN

The Office of the Chief Administrative Hearing Officer (OCAHO) has ordered Hartmann Studios to pay a fine of over $600,000, which is one of the largest fines that it has ever assessed for I-9 form violations not involving the knowing employment of undocumented workers. See United States v. Hartmann Studios, Inc., 11 OCAHO no. 1255 (2015). The violations were all substantive paperwork violations – the employer failing to sign Section 2 of the I-9 form, failing to timely prepare or present I-9 forms, failing to ensure employees properly completed Section 1 of the I-9 form, and failing to properly complete Section 3 of the I-9 form.

Hartmann Studios is an event design and production company, with offices in Richmond, California and Atlanta, Georgia. It produces a variety of events - charitable fundraisers, trade shows and civic events, such as victory parades for the San Francisco Giants after twice winning the World Series. Hartmann had gross revenue of $73 million in 2011. It has a collective bargaining agreement with the International Alliance of Theatrical Stage Employees Union, Local 16, which operates a hiring hall referring employees to Hartmann for separate project events.

In 2011, Immigration and Customs Enforcement (ICE) served Hartmann with a Notice of Inspection (NOI). At that time, Hartmann employed 718 individuals. In 2013, ICE issued a Notice of Intent to Fine (NIF) seeking $812,665.

Use of “Three-in-one” I-9 Forms

In addition to the 390 “three-in one” I-9 forms that were not signed by Hartmann, the company also failed to sign Section 2 on another 389 forms. Hartmann’s controller testified he “did not view signing Section 2 as one of the key responsibilities in complying with the employment verification requirements.”

Under the law, he was mistaken.

OCAHO reduced Penalties from $812,000 to $605,000 ICE sought $812,000 in penalties based upon an error rate of approximately 90%, which caused the baseline penalty to be $935 per error. The penalty was aggravated by 5% for the seriousness of the violations. Another 5% was added to a portion of the I-9 errors due to the presence of 205 unauthorized workers in Hartmann’s workforce.

Hartmann asserted the penalties were excessive, sought to punish them as opposed to being a deterrent to future violations, and asserted the violations were not serious. OCAHO forcefully disagreed that the violations were not serious because almost all of the violations concerned a failure to prepare I-9 forms or failure to sign the Section 2 attestation, which are the most serious of possible violations.

When Local 16 refers an individual to Hartmann, it has the individual complete a “three-in-one” form combining a portion of the W-4 form, parts of Sections 1 and 2, and a check off authorization for Hartmann to deduct and remit 3.5% of the employee’s wages to the Union. All of the approximately 390 individuals referred by Local 16 completed the “three-in-one” form, except for Section 2 of the I-9 form. After receipt of this form, Hartmann failed to sign Section 2 of the I-9 form. Hartmann asserted it did not hire the individuals referred by the union. However, it was legally incorrect because even in a hiring hall situation, the company is the employer, not the Union.

However, OCAHO determined Hartmann’s conduct was not as bad as employers in three other recent cases where OCAHO declined to reduce the penalties. However, it did not want to set the penalties too low and create a situation where the penalties were “merely a cost of doing business.” Thus, OCAHO reduced the penalties to $605,250 with almost all of the violations assessed at $700 each.

ICE decided to only charge Hartmann with failure to sign Section 2 of the I-9 form even though the “three-in-one” form was a modification of the I-9 form and was not an adequate substitute for the actual I-9 form. If ICE would have charged the I-9 form as being inadequate, as opposed to a failure to sign Section 2, it would have been a more serious charge.

Clearly, employers should always sign Section 2 of the I-9 form and not testify that signing such was not a key responsibility in employer compliance. Furthermore, if your company is using a union hiring hall, be careful of the paperwork that you are being sent. The employee and employer should be completing the paperwork after the referral. Finally, under no circumstances should a company use a “3 in 1” I-9 form. Hartmann was lucky not to be charged with a more serious violation. If the size of this penalty scares you, and it should, you should have an immigration compliance attorney review your I-9 forms.

You might be surprised what he finds.

800 Violations by Hartmann Most of the allegations were not in dispute. Hartmann conceded it failed to produce and/or timely present I-9 forms for 12 employees. Another six employees made substantive errors in Section 1 – did not check a box to indicate their immigration status; failed to sign the I-9 forms; or checked boxes reflecting permanent resident or authorized to work but failed to list their A numbers (and Hartmann did not retain a copy of the documents with their A numbers either). Hartmann also failed to complete Section 3 for three employees after their employment authorization expired.

Takeaways

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

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A belief that people are striving to do their best

7 Habits

of Highly Respected Leaders

By HARVEY DEUTSCHENDORF

“ The challenge of leadership is to be strong but not rude; be kind, but not weak; be bold, but not a bully; be humble, but not timid; be proud, but not arrogant; have humor, but without folly.” Jim Rohn

When having to give negative feedback they look for opportunities to turn it into a learning and growth opportunity for the employee rather than a form of punishment. They would rather be wrong about someone they thought had potential than miss an opportunity to bring out the best in one of their staff. Their motto is to belief in and trusts those they are in charge of until they are proven wrong.

Give credit where it is due and do what is right instead of popular.

Well respected leaders are confident and well grounded, secure in who they are and their abilities. As a result they don’t run away from making tough decisions even though they may not be popular. When things are going well they look for ways to give credit to their staff rather than trying to take all the credit themselves. Even when it is their idea that is successful, they try to deflect credit and shine it on those who implemented it. When tough decision needs to be made they make it quickly and avoid blaming others. Their strong sense of who they are helps them make decisions which they realize may make them unpopular and disliked at times.

Admit their mistakes and take responsibility when things don’t go as expected

W

hile someone may have advanced in their organization to a level of leadership at an organization, that alone will not earn them respect. Their title and position, corner office may earn them extra pay and benefits but respect is something that does not automatically come with the position. It has to be earned and is one of the most difficult things for a leader to acquire. Respected leaders are not always liked by everyone and not always popular. A leader may be well liked as a person, yet be a weak leader who is afraid to make difficult decisions, shows favoritism to those who stroke his/her ego and be quite ineffective. On the other hand there are leaders who intimidate their subordinates and use fear as a way of getting things done. None of these leaders will earn the respect of their followers. If we take a closer look at leaders who have walked the difficult path that have earned them respect we will see the following traits.

Willing to do or have done what they expect others to do.

Leaders should not ask others to do something that they have not done in the past nor would they be willing to do. They lead by example and their efforts will set a standard for the rest of the organization. If they are unwilling to put in the extra time and effort into a project that they expect of their staff they will be seen as hypocrites and lose the respect of those under them. Leaders who are highly respected will put in at least as much time and effort as those that they serve. Often they will lead by being the hardest working person on their team.

A high degree of self-awareness Respected leaders have a healthy dose of emotional intelligence and are aware of how they come across and how their works and actions impact others. They use this self-awareness in giving feedback by looking for sincere opportunities to praise the work of others. They monitor their emotions and never speak or act when highly emotionally, waiting until they have regained control and had time to think the situation over.

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While it may be easier to try and weasel out of taking responsibility and try to put the place on others when things go south, respected leaders always take the higher road. They take responsibility even when mistakes were made my by someone reporting to them and it would be easy to shift the responsibility. The buck stops here is a motto that they do more than pay lip service to, they live it. They have their people’s backs and are willing to defend them to those above them when necessary.

Support their people and don’t show favoritism Insecure leaders want people around them who will not threaten or challenge them and will promote yes people under them. Respected leaders see being challenged and new ideas as a way of helping them grow and become better leaders and people. They are in constant learning, growing mode and are supportive of staff that show initiative.

While it is tempting to favor people who stroke our egos, respected leaders rise above that and make a sincere attempt to reward talent, hard work regardless of their personal feelings about the person.

Not afraid to take risks, are open and honest, and encourage those under them to do so Respected leaders are willing to take risks and live with the consequences, realizing that without some risk there will be no growth, only stagnation. They encourage those they are leading to take risks and stand behind them when things don’t work out as planned. They believe that openness and honesty are the best way to operate and encourage others to come to them when things have gone wrong instead of trying to hide the problem because they are afraid of repercussions.

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

You can follow him on Twitter @theeiguy.

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