Your Employee Matters

The U.S. Court of Appeals for the Eighth Circuit has ruled that an employer had legitimate, non-discriminatory reasons for laying off its three oldest employees through a reduction in force (RIF). The Court found that the employees, who sued their employer for age discrimination under the Age Discrimination in Employment Act (ADEA), failed to prove that the employer’s stated reason for the RIF and the criteria it used to determine which employees to let go were pretextual.

The Case: In Rahlf v. Mo-Tech Corp., Inc., after a manufacturer of molds for the automobile, medical, consumer products, and computer industries laid off its three oldest employees as part of a RIF, the employees sued for age discrimination under the ADEA. The employer claimed that the RIF was necessary due to a change in client needs and anticipated reductions in workload and profitability. The employer further explained that technological advances in the mold-making process reduced the company’s need for manual mold makers such as the plaintiffs. To determine which mold makers to lay off, the employer ranked each based on several factors, including their proficiency with the new computerized manufacturing process, general mold-making efficiency, and management’s personal knowledge of each employee’s work performance. Based on these criteria, management agreed that the three plaintiffs should be let go.

The Ruling: The Eighth Circuit upheld the district court’s grant of summary judgment in favor of the employer, rejecting the plaintiffs’ claim that the employer’s stated reasons for the RIF were meant to conceal the real, discriminatory reasons for their terminations. The employees argued that the RIF was not necessary because within a year after they were fired, the employer hired five new employees. The court, however, noted that none of the new hires were mold makers. Rather, the new employees filled lesser skilled positions or were skilled in the computerized manufacturing process. The court also held that the fact that the remaining mold makers were busy and the company’s sales increased after the three employees were terminated did not support an inference that the RIF itself was pretextual. The court ruled that an employer does not have to demonstrate financial distress to justify its RIF decision, and then rejected the employees’ attack on the employer’s methods to determine which mold makers to terminate.

The employees contended that the employer’s failure to review positive performance evaluations and its reliance on the subjective evaluations of management were evidence of pretext. However, the court noted that given the small number of mold makers considered for the RIF (11) and management’s close involvement with the daily operations, subjective knowledge of each employee’s work performance and skills was relevant to the ultimate termination decision. Moreover, the employer relied on both objective and subjective criteria. The company measured each employee’s productivity and profitability objectively, based on whether hours budgeted for particular jobs were met or exceeded. The employer also consulted a computer program that assessed each employee’s performance. As for the employer not considering positive performance reviews, the Eighth Circuit held that it was not required to consider them in making its RIF decision because it had many other relevant factors under consideration. Finally, the court dismissed the employees’ argument that the employer provided inconsistent rationales for the layoffs, where there was no evidence to support the claim. Indeed, the Court of Appeals found that the employer maintained consistently that the reason for the RIF was shifting client needs and an anticipated decrease in workload and profits.

Lesson Learned: Because reductions in an employer’s workforce often give rise to litigation, it’s important to establish legitimate, business-related reasons for the move in advance. Although using objective criteria provides the best defense against a discrimination claim, the Rahlf decision shows that subjective factors can also be relevant. Whatever your reasons for doing an RIF, identify them clearly and base them on documented facts in case the reduction leads to litigation. See the RIF Checklist and Report In HR That Works.

Article courtesy of Worklaw® Network firm Shawe Rosenthal (www.shawe.com).

Things can look great on the surface. However, dig a bit deeper and all of us share at least some of these fears:

• The fear that we won’t live up to our expectations of ourselves.
• The fear that we won’t live up to expectations of someone else.
• The fear that while we are successful, we’re doing the wrong thing. As the saying goes, we might have climbed to the top of the ladder, but it’s leaning on the wrong wall.
• The fear that no matter how successful we might be now, it’s still not enough.
• The fear that we aren’t always a good person.
• The fear that we aren’t attractive or well liked.
• The fear that we’re disconnected with ourselves.
• The fear that we’re disconnected from family members and other loved ones.
• The fear that there has to be more, but we’re not sure what it is.
• The fear that we might fail.
• The fear that our “secret” might be disclosed.
• The fear that we have to do it all alone
• . The fear that we’re exhausted and out of balance.
• The fear that people will leave us.
• The fear that we’ll waste what we’ve accomplished because we have no loved ones with whom to share it.
• The fear that we’re out of control.
• The fear that our time and health are slipping away.
• The fear that we’ll become obsolete and put out to pasture.
• The fear that our children would rather have more of us than the money we earn or, conversely the fear that they would rather have our money instead of us.
• The fear that our greatest successes lie in the past.
• The fear we won’t be able to afford retirement.

Although I focus on the word “fear,” the term “unfair” also applies. What feels unfair to you? Why is that the case? What is it that you fear related to the unfairness? For example, if an employee doesn’t hand a project in on time, this feels unfair. However, it goes deeper than that. What lies behind the unfairness is fear that the employee is incompetent or doesn’t care, that you have misjudged or mismanaged them or will end up doing their work, or that your customer or client will misjudge you.

What does this have to do with management and HR? Absolutely everything!

Here’s the point: Nobody escapes feelings of unfairness or fear. Dr. Deming preached that one of the 14 Principles of Management is to drive fear out of your company. Acknowledging the fact that something feels unfair and then finding the fear behind it can be a powerful source of revelation. In my experience, the answer is to remain grateful and find the lesson that you need to learn. This is the ultimate responsibility; the source of growth that gives you the opportunity to let go without guilt and move on, knowing you’ve done your best. What more can you ask for?

Confidentiality Provision in Employment Agreements. In NLRB v. Northeastern Land Services, a non-union temporary staffing agency terminated an employee in violation of the confidentiality provision in his employment agreement after he complained to a client of his employer about the amount of pay he was receiving for the use of his personal computer for work.

The Court of Appeals for the First Circuit upheld the NLRB’s decision that the confidentiality provision, which prohibited the employee from discussing the terms of his employment, as well as his compensation with “other parties,” was overly broad and a per se violation of Section 8(a)(1) of the NLRA. Section 8(a) (1), which bars employers from interfering with employees’ right to discuss the terms and conditions of their employment with others. The NLRB had found that employees could reasonably understand this provision as prohibiting from discussing their compensation with union representatives.

The First Circuit held that the NLRB did not have to consider the employer’s justification for enforcing the confidentiality provision, which the employer stated was to prevent employees from disclosing its labor costs — one of the key components of its bid to clients.

The court held that when a discipline is imposed pursuant to an overly broad rule, this discipline is unlawful, regardless of whether the conduct could have been prohibited for lawful reasons.

If the employer had not relied on the confidentiality provision, but instead on the employee’s disruptive conduct, the employer probably would have been within its right to terminate him.

However, by relying on the overly broad provision, the employer lost any defense against the termination.

The idea of employee “engagement” remains a corporate buzzword. I find it interesting that the term “engagement” implies only a willingness to commit, without consummating this commitment. Webster’s defines “engage” as:

• Involved an activity
• Pledged to be married
• Greatly interested
• Involved especially in a hostile encounter

None of the above has anything to do with productivity. For example, you can be involved in your work without being motivated to do anything about it! Likewise, you can be greatly interested but inept. Interestingly, the word derives from the French word “gage,” which means something thrown down by a knight as a token of challenge to combat. Historically “engagement” means to be in the process of battle. True to the “at will” nature of employment, it seems that we’d rather have engagement than true commitment.

My diatribe on word choice aside, the 50 Most Engaged Workplaces Award identifies these eight criteria as the foundation for generating employee engagement:

• Leadership
• Communication
• Culture
• Rewards and recognition
• Professional and personal growth
• Accountability in performance
• Vision and values
• Corporate social responsibility

Essentially, this is a checklist of good management practices. You might as well cross out the word “engaged” and substitute “profitable.”

Noticeably absent from that list is any mention of compensation. I continue to believe that pay is the No. 1 reason why people go to work every day. However, once employees earn what they perceive to be a fair day’s wage, then these other factors come into play. Of course, another way is to look at what drives “engagement,” or its older equivalent, “motivation,” in Maslow’s Hierarchy of Needs, which focuses on the need for survival, security, belonging, ego gratification, and self-actualization.

After surveying numerous organizations and speaking in confidence with thousands of business owners and employees, I can tell you that the No. 2 concern at work is also the No. 2 concern at home: The quality of communication. Ultimately, we’re looking for some financial security at work and at home and then communication that’s clear, caring, and allows a safe place for dialogue. When you do a good job of communication, you support all the other factors mentioned.

Although all of the award criteria mentioned are great, your primary concern should be what matters most to your company and its employees. One way to learn this is to ask questions. Of course, unless you’re deaf, dumb, blind, or uncaring, you usually realize the major concerns. The question is, do you really want to do anything about it?

Today’s “squeeze economy,” in which we’re trying to get more out of everybody and everything, without having to pay for it, put managers under overwhelming pressure to perform. What can you do about it?

• Keep growing and pushing yourself to work on your “highest and best use.” Focus on those “A activities” that produce bottom-line results. Next, delegate or outsource the B level activities (administrative functions) to the extent possible. Finally, ditch the C activities, which are simply time-wasters. Be a freak about doing this if you want to survive without burning out.
• Become a great communicator. Whether you’re passing along the leadership vision, mission, goals, and values of your organization; working on an individual employee’s performance; or trying to learn more about what motivates employees, train yourself in communication. To be great at managing conflict, change, performance, engagement, career paths, strategic planning, and so forth without studying these disciplines, you’ll need more than experience or osmosis. So turn off your TV or computer game, ditch that fantasy league or online gossip, and pick up a book or program that will help you learn in these areas. Of course if you have access to the HR That Works program, the special reports, training modules and webinars would be a good place to start.
• Learn what employees want from you:
  • Be clear with them
  • Don’t play favorites
  • Do what you say you’re going to do, when you said you’ll do it
  • Provide feedback on a regular basis
  • Help define their career path
  • Keep yourself emotionally balanced

Remember, a poor relationship with managers is one of the top three reasons for employee turnover. Managers also influence the other two reasons (hiring a misfit, or failing to provide career growth and opportunity).

A word to the wise …

Here are four recent cases in which the Department of Labor went after companies for ADA violations. These settlements are far lower than if private counsel were litigating the suits and interested in a big jury verdict (which average more than $200,000):

EEOC Sues Tideland EMC for Disability Discrimination
The U.S. Equal Employment Opportunity Commission (EEOC) filed a disability discrimination lawsuit against the Tideland Electric Membership Corporation for not accommodating an employee, and then firing him because of his disability. The employee takes a legally prescribed narcotic medication to manage a chronic pain condition. After learning about this, Tideland EMC terminated the employee, without giving him time to change his medication regimen to keep his employment. The Americans with Disabilities Act outlaws discrimination against an employee based on a disability.

ENGlobal to Pay $100,000 to Settle EEOC Disability Discrimination Suit
ENGlobal Engineering, Inc., a Texas-based engineering firm, will pay $100,000 and additional remedial relief to settle a disability discrimination lawsuit by the EEOC. ENGlobal unlawfully fired an employee because it mistakenly assumed that his multiple sclerosis would limit his ability to work.

Retailer Finish Line Settles EEOC Disability Discrimination Lawsuit
Indiana-based retailer Finish Line, Inc. agreed to settle a disability discrimination lawsuit by the EEOC. Finish Line refused to grant an employee with a physical impairment a transfer to an available CSR position as a reasonable accommodation. The Americans with Disabilities Act requires employers to accommodate employees reasonably with disabilities, as long as the accommodation doesn’t cause an undue hardship.

Surveying Company to Pay $77,000 to Settle EEOC Disability Discrimination Lawsuit
Fisher, Collins & Carter, Inc. (Ellicott City, MD) will pay $77,000 and other remedial relief to settle a disability discrimination lawsuit filed by the EEOC. The company illegally discriminated against and fired an employee of 15 years after finding out that the employee had diabetes and high blood pressure.

The first thing to notice about these cases is the breadth of claims: A change in medication, a perceived MS disability, a shoulder injury, and diabetes. What’s more, the courts rejected the employers’ argument that many of the workers involved were “poor performers.”

Bottom Line: Learn how to manage poor performers who might have a disability, in a way that doesn’t land you in court!

Sales compensation can be a tricky affair to master. Any plan should answer these basic questions:

• What’s your overall goal?
• What is working and not working about the current plan?
• What do you need to eliminate or improve and what should you exploit further?
• Who is involved in designing the plan? Who can impact the plan and how will they be treated?
• What math will you use to establish a base salary, commission, bonus, any caps on income, frequency requirements, etc. – a percentage of what, when, how, where, etc.?
• How can you test the plan before you roll it out?
• Where can the plan be manipulated or even sabotaged?
• How does your plan compare to that of the competition?
• Who can review or provide a second look at your plan?

In the recent case of In Re: the Compensation of Mary S. Sandberg, an Oregon court overruled the Workers Comp Board and held that a JC Penney decorator, who was allowed to work from home, was covered by her Workers Comp policy when she tripped over her dog unloading a van.

Because she could not safely store all of the items in the vehicle at one time, she stored the excess items in her home garage. Her employer instructed Sandberg not to store these excess products at the studio, but to keep them at her home or any other place where they would be safe and dry. Thus, she used her home garage to store samples that from time to time she would need to exchange with other samples and materials that she kept in her van.

On the Saturday before the date of injury, a sale collection had ended, with a new collection beginning the next day. Because of the fabric sale change, Sandberg needed to remove the “old” fabrics from her van and replace them with fabrics for the new sale that were being stored in her garage. She was walking out her back door toward the garage to change the fabrics when her foot came down and she “felt something move.” Noticing that her dog was underfoot, she shifted to her other foot, lost her balance, and fell, sustaining a right distal radius fracture.”

Sandberg also regularly performed some work tasks, such as preparing bids and other paperwork, in her home. The employer denied her claim for compensation for the injury, a decision approved by the administrative law judge (ALJ) affirmed the denial, as did the Workers Compensation board.

When Sandberg appealed this decision, the court ruled that:

“In order to be compensable under Oregon law, an injury must ‘aris[e] out of’ and occur ‘in the course of’ a claimant’s employment; ORS 656.005(7)(a). Because the board did not determine whether claimant’s injury occurred in the course of her employment, that issue is not before us. The only issue on review is whether claimant’s injury arose out of her employment. Thus, our focus is on whether claimant established a causal connection between her injury and her employment, that is, whether claimant’s injury resulted from a risk connected to either the nature of her work or her work environment. ….

“[O]nce it is established that the home premises are also the work premises * * *, it follows that the hazards of home premises encountered in connection with the performance of the work are also hazards of the employment. [Editors Note: such as a dog lying around.]

” * * * That the employee is a telecommuter or other home-based worker should not, in and of itself, make any difference. Was the risk of injury a risk of this employment? So long as the employment subjects the employee to the actual risk of injury, the argument follows that the injury should be compensable.

“Here, claimant was walking to her garage for the sole purpose of performing a work task. She fell while moving about an area in which she had to move about in order to perform the work task, given the conditions of her employment. Therefore, we conclude that claimant’s injury resulted from a risk of her work environment. As such, it arose out of her employment.”

The bottom line for employers: make sure that telecommuting employees have safe workplaces and proper insurance coverages. HR That Works Members should use the Home Based Worker Checklist.

By now, most of you who follow employment law have heard about and possibly read the U.S. Supreme Court’s decision in Wal-Mart v. Dukes, which overturned certification of a class action sex discrimination case brought on behalf of 1.5 million current and former female Wal-Mart employees. (If not, our recent FR Alert on this case will bring you up to speed.) Although Dukes is a sex discrimination case, it will probably have a major impact on class actions in other areas of the law, including wage and hour lawsuits.

• Dukes will likely make it more difficult for plaintiffs to argue that large classes should be certified absent concrete evidence of a common corporate policy or practice tying the claims of class-members together. This will be particularly important in cases where the actions of individual managers are at issue, such as plaintiff allegations that employees were required to work “off the clock” contrary to established policies.
• It’s unsure how the courts will apply Dukes to collective actions under the Fair Labor Standards Act. The Dukes decision dealt with a class action certified under Federal Rule of Civil Procedure 23, which governs most class actions in federal court. In contrast, FLSA collective actions proceed under a different set of rules specific to the FLSA. The standards for certifying a class or collective action are similar – Rule 23(a)(2) requires questions of law or fact common among the class members, while a collective action under 29 U.S.C. § 216(b) requires class members to be “similarly situated.” However, there are subtle but potentially important differences, and the standard for preliminary certification of a collective action is generally a lower bar than for certification of a Rule 23 class action. That being said, although Dukes might not apply directly to FLSA collective actions, it will probably exert a significant influence over courts’ analysis of such cases.
• One likely effect of Dukes will be to push more wage and hour class action lawsuits into state court. Because Dukes governs class certification in federal courts, plaintiffs’ attorneys in states with more liberal class certification rules now have a strong incentive to file their cases in state court under state minimum wage and overtime laws, without reference to the FLSA and federal law. Although the impact of this shift will vary from state to state, federal courts are frequently regarded as a more favorable jurisdiction for employers than their state counterparts. Thus, while Dukes is a victory for employers, it might simply shift the wage and hour fight to less favorable ground.

Insights for Employers:

Although the esoteric procedural issues raised in Dukes will be of great interest to wage and hour litigators, what, if any, practical implications does the decision have for employers? Although the ruling does not usher in any sweeping changes for how employers conduct their day-to-day compliance activities, it does emphasize the importance of organization-wide policies and practices as both a tool for defending against wage and hour claims and a potential source of vulnerability.

Dukes strengthens the case for employers to adopt and effectively implement strong policies prohibiting wage and hour violations. For example, a company policy that strictly prohibits off-the-clock work and requires accurate recording of work hours, combined with an effective training and compliance program, might go a long way toward heading off class or collective action claims alleging that individual managers violated the policy by requiring or permitting off-the-clock work.

At the same time, Dukes might place an even brighter spotlight on cases based on a widespread company policy or practice. For example, claims alleging that an employer systematically misclassified specific job titles as exempt might have the necessary element of commonality among members of the class that the Supreme Court found lacking in Dukes.

The bottom line: Be sure to review and update your wage and hour policies, regularly, train supervisors, and audit compliance.

Article courtesy of Worklaw® Network firm Franczek Radelet.

One of the career challenges HR executives face is being able to articulate the bottom-line difference they can make. In part, this is because very few of them focus on making those types of distinctions as their activities are non-strategic in nature. I recently became engaged to help hire a high-end HR executive who will make at least $150,000 per year. The reality is out of the 3,000 small to midsized companies that use our program, I’d be surprised if as many as five HR executives earn that type of income. Larger organizations justify the expense because they can spread it over a greater number of employees. Actually, the larger the organization, the lower the HR expense ratio per employee. According to Berntson and Associates, HR costs the average employer $1,000 to $1,500 per year. In a sense, if you have 50 employees, you have a $65,000 HR executive.

So here’s the challenge: Even if you’re a small to midsized company that doesn’t have $150,000 per year to pay an HR executive, you still need strategic HR initiatives! Otherwise, internal pressures will undermine your sales and marketing efforts.

If you doubt the return on investment of good HR practices, run your numbers on the HR That Works Cost Calculator. Even a conservative analysis will show the incredible opportunity available. However, you’ll need to make a commitment of both time and money to make it happen. Think of it this way: Suppose you remain “nonstrategic” in your HR practices. So what if you have poorly trained managers, below average employees, high claims, low productivity, and a ton of drama? Perhaps you’re familiar with this situation. In any case, there’s no reason not to “get” the importance of working on HR instead of just being in HR. Whether you have 10, 100 or 1,000 employees the need remains the same.

There are only three solutions:

1. Use a program such as HR That Works and commit to a schedule to implement it.
2. Hire a coach to help you implement a program such as HR That Works.
3. Have third parties come in and do things for you (otherwise known as “fractional” HR).

What will be your next strategic HR objective – and how will you achieve it?