All posts by Mark McGraw

More Whistleblowers in the Woodwork?

According to a recent report from the Securities and Exchange Commission, the agency has made just one payout from its whistleblower award program since the Dodd-Frank Act was enacted in 2010.

Other, larger numbers from that report, however, should be of greater concern to employers, according to one attorney.

The SEC also reports having received more than 3,000 whistleblower tips since the program was established, and indicates there are 143 notices of action for whistleblower complaints currently in the pipeline. Those figures portend a potential—if not likely—spike in the number of awards to be paid out in 2013, says Steven Pearlman, a Chicago-based partner in Proskauer’s labor and employment law department.

“Employers shouldn’t walk away from this data with any sense that we’ll see the same result next year,” says Pearlman, who is also co-chair of the firm’s whistleblower and retaliation group.

The onus is always on public companies and HR to encourage employees to bring whistleblower complaints through internal compliance programs, rather than going to the SEC or—in the case of a private company—to the Environmental Protection Agency or a licensing board, he says.

We find across the board that employees are more apt to go outside the company to, say, a plaintiff’s attorney, the SEC, the Department of Justice or another government agency, where they believe their complaint will be taken seriously and will get a response within a reasonable period of time.”

One method for encouraging employees to first bring complaints to the organization’s attention is the creation of a whistleblower liaison, says Pearlman.

“That’s something I don’t see companies doing enough of; in a formal way where the liaison is trained and understands how to interact with whistleblowers, and understands how to serve as a liaison to compliance and legal as well.”

Some companies create a dedicated position just to handle whistleblower-related activity, but “it’s certainly reasonable to take someone who’s currently a high-level HR person and add this on to their responsibilities,” he says. “Employers need to do what’s within their budgets, and they have to look at present personnel.”

Whatever the approach, employers “need to act now,” concludes Pearlman.

What’s in the pipeline is most concerning to me. When these bigger awards come out, it’s going to generate more tips and encourage more employees to go to the SEC. We know more individuals are going to be blowing the whistle.”

Keeping Focus on Performance

A recent ruling in the case of A.D.P. v. ExxonMobil not only illustrates courts’ expanding definition of disability, but should remind employers of their limits in dealing with employees’ substance abuse problems.

In August 2007, an ExxonMobil employee—consistently ranked as a top performer throughout nearly 30 years with the company—informed her supervisors that she was an alcoholic, and would be taking leave to check into a rehabilitation program to address her alcohol dependency and depression.

At the time, there was no pending or threatened disciplinary action against her, and two representatives from the company’s HR department later testified they had only learned of the employee’s alcoholism after she had disclosed it voluntarily.

Upon her return to the job later that year, she was required to sign an agreement obligating her to abstain from alcohol and submit to random breathalyzer tests as a condition of her continued employment. Although she passed nine random tests over the next several months, a subsequent test showed a blood alcohol level between 0.04 percent and 0.05 percent. She was fired four days later.

She subsequently sued, claiming disability discrimination. The Appellate Division of the Superior Court of New Jersey ruled the testing requirement was indeed discriminatory on its face, as only self-identified alcoholics were subjected to the random breathalyzer tests.

A judge refused ExxonMobil’s motion to dismiss the case, finding the company had no safety consideration or business necessity that dictated requiring the test. The court also pointed out there were no signs the woman was suffering from the effects of her alcohol use, nor had her job performance been called into question since her return to work.

The court’s decision is “not surprising,” but holds a pair of important lessons for companies and their HR leaders, says Mark Spring, a Sacramento, Calif.-based partner in the employment law firm of Carothers DiSante & Freudenberger.

Employers and HR professionals need to make sure they are focusing on job performance [in such cases]. In this case, the employer’s focus on alcohol use—as opposed to job performance—is what got it in trouble. Had they simply implemented a reasonable suspicion testing program, allowing them to test after evidence of reasonable suspicion of on-the-job use or intoxication, this could have been avoided.”

The case also underscores the importance of treating conditions such as alcoholism and drug addiction like any other disability, says Spring.

As long as the disability is not impacting work, then the employer is going to be very limited in its ability to address any disability, including alcohol or drug addiction. I think some employers still have a hard time equating these conditions with more ‘traditional’ disabilities, and this can lead to violations such as what happened with this employer.”

Keeping Benefits Costs in Check

With the 2012 election season behind us and President Barack Obama returning to the Oval Office, the fate of the Affordable Care Act seems secure.

For many employers, this means exploring ways to contain benefits costs they project to increase once ACA provisions take hold in 2014.  

Now would be a good time to start, and if a recent survey from New York-based consultancy Mercer is any indication, many companies are already well on their way.

Mercer’s National Survey of Employer-Sponsored Health Plans finds employers held 2012 health benefits cost growth to the lowest average annual increase since 1997. The poll of 2,809 employers found growth in the average total health benefits cost per employee slowing from 6.1 percent in 2011 to 4.1 percent this year.

The cost averaged $10,558 per employee in 2012. Large employers—those with 500 or more employees—experienced a higher increase (5.4 percent) and higher average cost ($11,003). According to the survey, employers expect another fairly low increase of 5 percent in 2013. This bump, however, reflects changes companies plan to make to reduce cost, according to Mercer. Cost would rise by an average of 7.4 percent for companies making no changes.

Employers are “very aware that, in 2014, when the health reform law’s provisions kick in, they will be asked to cover more employees and face added cost pressure,” said Julio A. Portalatin, Mercer president and CEO, in a statement. “They’ve taken bold steps to soften the impact, and it’s paying off already.”

One step some employers have already taken to “reset” plan value in 2012 included offering a lower-cost consumer-directed health plan, according to the study. Others have raised the deductible of an existing PPO plan, for example.

Companies are also looking at new ways to purchase health insurance as well as influence the quality of care employees receive, according to Mercer. Among participating companies with 5,000 or more employees, the use of high-performance provider networks rose from 14 percent to 23 percent in 2012, with the use of surgical centers of excellence increasing from 18 percent to 35 percent.

Still, while organizations “deserve a lot of credit” for containing cost growth this year, “no one silver bullet will end cost escalation forever,” and companies must make containing benefits costs a priority in the year ahead and beyond, noted Tracy Watts, a partner in Mercer’s Washington, D.C. office.

Health reform has presented us with a new set of challenges, and we have to keep thinking one step ahead.”

Advantage Employer?

A recent federal district court decision may give companies a useful weapon to defend themselves in litigation with the Equal Employment Opportunity Commission.

In the case of EEOC v. DHL Express, the U.S. District Court for the Northern District of Illinois has granted the logistics provider’s motion to compel the EEOC to make all claimants in the case available for deposition.

In the suit, a group of 94 black drivers and dockworkers for DHL Express in Chicago claimed they had been unlawfully given less desirable, more difficult and more dangerous route and dock assignments than white employees. In addition, the claimants alleged they were typically assigned routes in predominantly black areas.

The EEOC had refused to let DHL depose all of the claimants involved, contending the vignettes the EEOC had provided for each claimant in the interrogatories were sufficient, as were the company’s depositions of 34 of the plaintiffs. Further, the agency argued that deposing each claimant would be unnecessarily expensive and redundant.

The court, however, determined that “expenses are being incurred based on how the EEOC has decided to prosecute this case overall, including hiring an expert to analyze route assignments. The court will not jeopardize DHL’s opportunity to defend itself in order to accommodate the expense of plaintiff’s litigation strategy.”

This was just one court’s opinion, and others may not apply the same reasoning in the future. But the DHL decision may give the EEOC cause to rethink its approach to litigation going forward, says Jeff Nowak, partner and co-chair of the labor and employment practice group at Chicago-based law firm Franczek Radelet.

“Over the past few years, the EEOC has pursued an aggressive agenda to expand the scope of its charge investigations to focus on systemic discrimination,” he says. “As a result, it regularly subpoenas employer documents that far exceed any semblance of reasonableness. Unfortunately, it has a track record of approaching litigation in a similar fashion.”

The ruling in the DHL Express case, however, levels the playing field to some extent, “in that employers now are better able to confront purported charging parties and class members to test the veracity of these individuals’ claims and mount an adequate defense,” says Nowak.  

Will [this decision] stem the tide of EEOC litigation against employers? No. But it sends a message to the EEOC that it must carefully evaluate potential litigation before filing suit, and set aside any ‘hide the ball’ tactics when engaged in litigation.”

Sign Here, Please

The recent ruling in a case that one attorney describes as “troublesome” holds a valuable lesson for employers and HR in the proper enforcement of arbitration agreements.

The details, according to a summary from White Plains, N.Y.-based employment and labor law firm Jackson Lewis …

In 2010, the Sports Club Co., headquartered in Los Angeles, revised its employee handbook to include an arbitration agreement that all employees were required to sign as a condition of employment. Susan Gorlach, the organization’s HR director at the time, was responsible for distributing the new handbook to employees and obtaining signed arbitration agreements.

In June 2010, Gorlach told the company’s chief operating officer that all but four corporate employees had signed the arbitration agreement, but neglected to mention that she was among that small group.

In July, Gorlach—still in the process of gathering employee signatures—reportedly suggested the company “think about” how to proceed should an employee ultimately refuse to sign. She resigned the following month, and subsequently sued TSC for wrongful termination, sexual harassment and retaliation, among other claims.

The company denied the allegations. In asking a trial court to compel arbitration, TSC argued that, through her continued employment with the organization, Gorlach assented to the arbitration agreement despite not signing it. A trial court declined to compel arbitration, ruling that Gorlach had, by omission, intentionally misled the company to believe she had signed the agreement. Nevertheless, the fact that Gorlach hadn’t signed led the court to rule that she was not equitably estopped from denying the existence of the agreement, and that no implied contract existed between the parties. The appeals court ruling affirms that decision.

“This is a troublesome case, because the person who was supposed to be the gatekeeper for ensuring the agreements to arbitrate were signed was able to avoid having to arbitrate her claims by a sleight of hand,” says Mark Askanas, partner and litigation manager in the San Francisco office of Jackson Lewis.

Employers’ and HR professionals’ takeaway from the case is clear, he says.

If your agreement to arbitrate specifically requires that employees sign the agreement, it must be signed to be enforceable. The employer’s belief—however reasonable—that an employee signed the agreement will not supplant this requirement.”

Employers can take one of two approaches to enforcing signature requirements, according to Askanas.

First, the agreement can state that disputes are subject to arbitration, regardless of whether the employee signed the agreement. Second, employers can implement a system that tracks the actual signatures to the agreement, and does not rely entirely on someone’s representation, express or implied, that he or she signed the agreement.”

Reimagining Performance Management

I had the pleasure of spending Tuesday at the New York Athletic Club. No, I didn’t get to try out the racquetball courts, exercise equipment, billiards room, sauna or the sun deck that sits atop the beautiful 24-floor facility. Rather, I made the 90-minute train ride from Philadelphia to attend the 2012 Human Capital Leadership Forum being held at the historic venue.

Throughout the day, the 240 HR professionals, consultants and vendors on hand took in a variety of panel discussions and presentations that delved into the transforming role of today’s HR leader, how HR executives can incorporate business analytics and business intelligence into their day-to-day functions, identify and develop future leaders, align the organization’s workforce with future business goals and more.

A presentation of particular interest to me was delivered by Caroline Stockdale, senior vice president of human resources with Medtronic Inc., a Minneapolis-based developer and manufacturer of medical device technology and therapies. In the early afternoon session, “Innovating to Transform the Employee Experience and Accelerate Growth,” Stockdale shared “some highlights of the HR journey” she’s embarked on since joining the organization in 2010.

In that time, Stockdale has been at the center of an effort to build an innovative HR department, where “bold new ideas and approaches to traditional HR processes and systems are not only encouraged, but expected,” she said.

One of the brash ideas her HR organization has implemented is the abolishment of the organization’s old rating-based performance management system, she said.

In the past, for example, annual performance reviews were administered to Medtronic employees in each business unit, each of whom was rated on a 1-to-5 scale. The problem with such a system, however, is that “all teams are not created equal,” she says. Thus, using the same scale to rate individuals across functions is at least somewhat flawed and unfair.

For instance, a high performer on a low-performing team may earn a ‘5’ based on individual performance in comparison to their peers, while a worker in a more critical, higher-performing unit may ultimately bring more to the organization overall, but only receives a ‘3’. Or, for those who favor sports analogies, think of it somewhat like trying to accurately measure the worth of a “good” baseball player in the big leagues against that of a player considered a “superstar” at the minor-league level.

Ultimately, Medtronic has moved away from competitive assessments toward providing performance feedback, coaching and development to employees on a more regular basis, as opposed to the more “traditional” annual review process.

At lunch that afternoon, I asked the gentleman seated next to me – a senior vice president of HR at a large asset management company – what he thought of Stockdale’s talk. As we tucked into our tortellini, he mentioned that his firm’s leadership had “been kicking around the idea” of scrapping its current performance management system — which he described as being similar to Medtronic’s old method – and adopting a simpler approach that involves managers offering more frequent input to employees regarding their performance, and sets realistic goals that are more directly tied to business results.

He was quick to note, though, that his organization is still grappling with just how it plans to implement a new and improved performance management system.

Sound familiar?

It probably does, if you read our July/August 2012 cover story, “There’s Got to Be a Better Way.” In that feature, Senior Editor Andy McIlvaine discussed the “needless complexity” of performance management at many organizations.

“Experts … agree that performance management – as it exists today in too many organizations – is broken,” he wrote. “Fixing it … involves going back to the basics: setting business-linked goals that are challenging yet achievable, teaching managers how to give feedback that is helpful and not demeaning, and supporting it all with a process that is intuitive rather than complicated. None of this, [experts] admit, will necessarily be easy to implement.”

True enough. But judging from the Leadership Forum audience’s enthusiastic response to Stockdale’s story of HR innovation in the performance management arena, there seems to be plenty of HR leaders with a keen interest in taking on the challenge.

Leave in Las Vegas

According to an Illinois district court judge, what an employee does in Vegas … may qualify as FMLA leave.

An employer’s motion for summary judgment was denied in the case of Ballard v. Chicago Park District, which found plaintiff Beverly Ballard claiming her former employer denied her FMLA rights by declining to approve a trip to Las Vegas with her terminally ill mother.

The details …

In early 2006, Sarah Ballard—Beverly’s mother—was diagnosed with end-stage congestive heart failure. In December 2007, Sarah was granted a trip to Las Vegas by the Fairygodmother Foundation, a charitable organization that grants “wishes” to individuals with terminal illnesses. As her primary caregiver, Beverly was to accompany her mother on the excursion.

She claims to have approached supervisor Eric Fischer during a meeting break on Dec. 19, 2007, to request leave for the trip. Beverly Ballard alleges that she discussed FMLA leave with Fischer, and was told she was notifying him too far in advance, and that he would get back to her.

Fischer and Chicago Park District deny the conversation ever happened, and Fischer claimed that he didn’t learn of Ballard’s trip until he received a faxed leave request in January 2008. The Park District maintains that the quality of the fax was so poor that Fischer initially thought it was a request for personal days and thus denied it, according to court records.

Ballard maintains she repeatedly tried to reach Fischer by phone after learning her request was denied, and, while she hadn’t received formal approval, she “believed that her FMLA leave would be approved” based on conversations she had with Fischer’s administrative assistant during this time. Thus, she left for Las Vegas with her mother on Jan. 21, 2008.

During her trip, Beverly Ballard acknowledges shopping with her mother, dining at restaurants and playing slots, while admitting there were “no plans for Sarah Ballard to seek professional medical care, therapy or treatment for her heart condition” during their Vegas stay.

Ballard, who returned to work on January 28, 2008, was fired in March of that year for her allegedly unauthorized absences, and subsequently filed a lawsuit under FMLA.

Under the court’s rationale, the decision “departs from other precedent—which it acknowledges—in holding that the trip on which the caregiver accompanies the patient needn’t be a trip which was itself either part of ongoing treatment or [taken] for the purpose of receiving treatment, says Ronald Meisburg, a Washington, D.C.-based partner in Proskauer’s labor and employment law department.

“Thus, under this court’s ruling, any trip a patient might choose to take would support FMLA leave for the caregiver to go along. This may be overturned on appeal, or eventually become a question for Supreme Court resolution. In the meantime, the rationale of the court introduces a variable that may pose more difficult questions” for employers, he says.

The boundaries of FMLA leave are subject to expansion, and even potential abuse. For example, suppose the caregiver understandably needed a vacation but was the sole caregiver of a patient. Could the caregiver take the patient along on vacation and claim FMLA leave? Or could a caregiver mask his or her own vacation by arranging a trip for the patient, and then going along as the caregiver on FMLA leave?”

School District Taught a Lesson in FMLA Case

Note to employers: always keep a complete and accurate record of the hours logged by non-exempt workers.

A recent New York appeals court decision should help remind HR of the price for failing to do so.

In the case of Donnelly v. Greenburgh Central School District No. 7, high school teacher Edward Donnelly claimed the district denied him tenure after he took time off under the Family and Medical Leave Act to undergo gallbladder surgery. The district, however, argued Donnelly was not eligible for FMLA leave because he had only worked 1,247 hours the previous year, leaving him just shy of the 1,250 hours required to qualify.

Both parties agreed that Donnelly worked seven hours and 15 minutes each day for 172 days during the 12-month period preceding his leave—for a total of 1,247—per his union’s collective bargaining agreement. The same agreement, however, also recognizes that “teachers have responsibilities which they readily and willingly perform that extend beyond the pupil’s regular school day.”

Indeed, Donnelly contended he regularly worked more than one hour before and after class. His assertion was supported by a June 2006 performance evaluation stating that Donnelly often arrived early to work, and frequently “stay[ed] late into the afternoon working with his kids to ensure their success.”

That performance review detailing Donnelly’s extra hours on the job was a factor in the Second Circuit Court of Appeals decision to overturn a lower court’s ruling. The appeals court also found that the school district hadn’t kept an adequate, accurate record of the hours Donnelly had worked, and noted that the collective bargaining agreement in place wasn’t the only means of calculating Donnelly’s hours under the FMLA.

The Donnelly ruling presents a “cautionary tale” for HR professionals, says Stephen Sheinfeld, partner and head of Winston & Strawn’s labor and employment relations practice group in New York.

[This case] reminds employers of the need for accurate recordkeeping and potential liability arising from work performed outside of the ‘regular’ workday,” says Sheinfeld. “Particularly, given the prevalence of remote-access work capabilities, employers need to be aware that work conducted by non-exempt employees outside of the regular workday may be compensable under the Fair Labor Standards Act, whether conducted on a PDA, home computer or otherwise.”

Such work, when performed by exempt employees, may not be required to be recorded for the FLSA, but may be counted as hours worked for purposes of the FMLA, he adds.

“Thus, the lesson for HR is to maintain policies, corresponding records and policing mechanisms so that there is no confusion as to hours worked.”

Boomers Get Social in Job Search

The social networking sphere is supposed to be the domain of the young, right?

It’s fair to say that Generations Y and Z have led the way in making new verbs like “Facebook me” and “tweeting” a part of our everyday language. But, there’s no shortage of data showing that older generations—particularly baby boomers—have begun to plug into the social network as well.

And, boomers are doing much more than posting pictures and sharing mundane details of their daily routines, according to a recent poll conducted by Millennial Branding, a Boston-based research and consulting firm, and

The survey of 5,268 job seekers actually found that more baby boomers (29 percent) report using social networks as part of their job search than members of both Generation X (27 percent) and Generation Y (23 percent).

If that statistic surprises you, you’re not alone.

“I was very surprised, for the obvious reasons,” says Dan Schawbel, founder and managing partner of Millennial Branding. “It’s interesting. A lot of people would suspect that it would be a very small number of boomers using social networking.”

A key contributing factor, says Schawbel, could be the large numbers of older job seekers using LinkedIn, the well-known networking site for people in professional occupations.

“For boomers, [LinkedIn] is just easier for them to use. All their connections are using it.”

Indeed, studies put the average LinkedIn user age in the mid-40s, with a mean salary in the six-figure range, he says. “So [many of these users] hold, or are looking for, executive- and director-level jobs.”

So, while most large companies already use social networking for recruiting purposes, this knowledge may help HR professionals make more efficient use of their time when recruiting for the types of top positions typically filled by boomer-age candidates, says Schawbel.

The reality is, if you’re an employer, you have to use all the top social networks. You can’t avoid Twitter, LinkedIn and Facebook. But this finding shows you that you may use most of your time on LinkedIn for executive recruiting. Recruiters have less and less time these days. So this report tells them where they should spend their time and how.”

Turning Weakness into Strength

The ability to recognize one’s own faults is in itself considered a positive personal attribute.

Many bosses, however, seem to lack the self-awareness and/or introspective powers necessary to look inside themselves, identify shortcomings and start working to overcome them.

Or at least some of their employees think that’s the case.

A recent poll of 2,700 North American workers, conducted by leadership consulting and research firm Healthy Companies International, found that more than one-third (37 percent) of employees said their managers “lack openness around personal strengths and weaknesses.”

Leaders are largely judged on – and rewarded for — results, which leads to a sharper focus on the strengths that lead to achievement rather than the weaknesses that may somehow diminish them, says Stephen Parker, president of Arlington, Va.-based Healthy Companies International.

“Also, the more senior a leader becomes, the less authentic feedback he or she is likely to get,” he adds.

But, while managers may find fewer and fewer equals to provide honest appraisals as they climb the ranks , HR leaders can step in to fill that gap, says Parker.

HR should model a personal development process that speaks directly to [leaders’] strengths and weaknesses. It’s also crucial that reward systems include the use of 360-degree feedback, and that leaders be held accountable for developing and executing robust development plans for themselves and members of their teams. Effective reward systems balance the focus between short-term financial and operational goals with leadership behaviors that support a healthy culture and encourage lifelong learning for both leaders and their teams.”

HR should also ensure that strong leadership development programs are in place for future managers and executives as well, continues Parker.

“In addition to offering a key competitive advantage in terms of attracting and retaining talent, high-potential programs are critical to sustaining organizational capability. They also offer the opportunity to develop a basic leadership skill from the very beginning: The ability to both give and receive constructive feedback. Mastering this skill will not only propel the individual, but the company as well. Viewed this way, understanding and appreciating the balance between one’s strengths and weaknesses becomes a clear competitive advantage.”