Category Archives: legislative

An End to Harassment Arbitration?

Does the “Ending Forced Arbitration of Sexual Harassment Act of 2017have a better chance of becoming law than past attempts to restrict arbitration agreements? Especially given the timing, some believe the answer is an unequivocal yes.

Rep. Cheri Bustos (center) announces a bipartisan bill last week.

As you may have heard, Rep. Cheri Bustos (D-Ill.) and Sen. Kirsten Gillibrand (D-N.Y.) introduced bipartisan legislation last Wednesday aimed at voiding forced arbitration agreements and enabling “survivors of sexual harassment or discrimination to seek justice.” Senate co-sponsors include Lindsey Graham (R-S.C.), Lisa Murkowski (R-Ark.), Kamala Harris (D-Calif.). House co-sponsors include Walter Jones (R-N.C.), Elise Stefanik (R-N.Y.), and Pramila Jayapal (D-Wash.)

In announcing the bill, Bustos said …

“If we truly want to end sexual harassment in the workplace, we need to eliminate the institutionalized protections that have allowed this unacceptable behavior to continue for too long. Whether it’s on factory floors, in office buildings or retail businesses, 60 million Americans have signed away their right to seek real justice and most don’t realize it until they try to get help. Our legislation is very straightforward and simple—if you have been subjected to sexual harassment or discrimination in the workplace, we think you—not the employer—should have the right to choose to go to court. While there are a lot of good companies that take sexual harassment seriously and work to prevent it, this legislation will help root out bad actors by preventing them from sweeping this problem under the rug.”

“No worker should have to put up with such an unfair system,” said Gillibrand.

On hand for the announcement was former Fox News’ host Gretchen Carlson, who sued her former employer and its then CEO Roger Ailes over harassment. (Ailes passed away in May.)

Carlson, who received a $20 million settlement in the case, described forced arbitration as a harasser’s best friend. “It keeps harassment complaints and settlements secret. It allows harassers to stay in their jobs, even as victims are pushed out or fired. It silences other victims who may have stepped forward if they’d known. It’s time we as a nation—together—in bipartisan fashion give a voice back to victims.”

Lawrence Lorber, senior counsel with Seyfarth Shaw in Washington, predicts that the bill, as its currently worded, will likely meet some opposition. Its chances, he adds, would be greatly improved were the wording more targeted to sexual assault and harassment.

“I think the language of the bill goes further than what they intended,” Lorber says. ”What it does is not only preclude arbitration from being applied to sexual-harassment matters, but [from] all contracts of employment.”

Lorber points out that there already exists a model for addressing the legislation’s shortcomings. Ironically, he says, it’s The Franken Amendment, which was part of the Defense Appropriations Act and prevents defense contractors from requiring arbitration in instances arising out of sexual assault and harassment. (Sen. Al Franken, D-Minn., who sponsored the amendment, announced last week he would soon be giving up his Senate seat as a result of accusations of sexual misconduct.)

Thanks to The Franken Amendment, Lorber says, there’s already a law that exists for addressing this issue, though “for a much more limited universe.”

Lorber says he wouldn’t be surprised to see a bill addressing this issue become law as soon as early next year.

How to Address the Labor Crunch

It’s the best of times for U.S. workers, it’s the worst of times for U.S. employers. Unemployment is at record lows while wage growth is at record highs, and many companies are hitting a wall trying to find qualified new hires to fill their ranks.

Jobs — particularly in industries such as construction — are going begging. And unless something changes fairly soon, this is going to have a big impact on economic trends. As Mark Zandi, chief economist at Moody’s Analytics, tells NY Times business columnist Eduardo Porter for a recent column, “Over the next 20 to 25 years, a labor shortage is going to put a binding constraint on growth.”

One of the biggest factors in the current talent scarcity is the withdrawal from the labor force by working-age (25 to 54) American men. The nation’s labor-force participation rate of this demographic is nearly the lowest in the industrialized world, Princeton University economist Alan B. Krueger tells Porter. Many of these men lack the skills that today’s new jobs require, while others have been lost due to disability or opioid addiction.

What to do? Porter cites a new study from researchers at the University of Maryland that recommends a number of policy solutions that may appeal to conservatives and liberals alike. The researchers, Melissa Kearney and Katharine Abraham, say improving access to high-quality education and providing more child-care resources will help people upgrade their skills while making it easier for working moms to re-enter the workforce. Expanding the earned-income tax credit may also entice nonparticipants to get back in the job-hunting game.

And, although support seems to be growing for raising the minimum wage ( to as high as $15 per hour in some quarters, in order to equalize it with the inflation-adjusted minimum wage from decades ago), Kearney and Abraham express caution about doing so, noting that it will price some job seekers out of the market. They also recommend reforming disability insurance to encourage recipients to seek jobs. And, they say, limiting immigration will only exacerbate the labor shortage, notwithstanding the stated conviction of many Americans that immigrants take jobs from deserving citizens.

These are all common-sense proposals, but they require political unity and some expenditure of public funds. That’s a tall order, of course. So maybe it’s time the nation’s employers take it upon themselves to be activists on this front, for the sake of the labor market and the economy.

Bill Would Boost ESOPs

You may think the U.S. Senate has bigger fish to fry – uh, like healthcare reform? – but senators now have something new to consider that will be of interest to HR leaders: a bill with bipartisan support that would encourage companies to offer employee stock ownership plans.

Introduced July 12 by Sens. Gary Peters (D-Mich.) and Jim Risch (R-Idaho), the bill in part aims to give workers another way to save for retirement, according to a statement issued by Risch. ESOPs also may offer

business owners the opportunity for a comfortable exit.

Advocates for ESOPs also tout their power to inspire employee satisfaction, retention, engagement and loyalty in companies of any size. Risch says 13.5 million employees now  participate in 7,000 ESOPs nationally, reaping 12.5 percent more than their peers in wages and retirement contributions.

The bill is aimed at smaller companies that may not have easy access to the expertise needed to launch an ESOP. It calls for the nonprofit business-advisory group SCORE — which operates with support from the U.S. Small Business Administration — to provide those companies the information they need.

“ESOPs are the perfect transition solution for many successful closely held companies, benefiting both employees and owners,” says Corey Rose, founder of the National Center for Employee Ownership, quoted in Risch’s statement. “But despite their many tax, planning, and legacy benefits, few owners know that this is even a possibility. The outreach program proposed in this bill would be a very cost-effective way to address this issue.”

Is One Watchdog Better Than Two?

The Trump administration wants to combine the Equal Employment Opportunity Commission with another federal watchdog agency—and both worker and business groups are worried.

The issue got attention on Wednesday as new Secretary of Labor Alexander Acosta testified before a House subcommittee about how President Trump’s proposed budget will affect his department.

Among other proposals that would cut Labor department spending by 20 percent overall, Trump’s budget also proposes merging the department’s Office of Federal Contract Compliance Programs into the EEOC, an independent agency.

Acosta told skeptical Democrats on the panel that the merger made “common sense” and would not hurt workers, the Associated Press and other news organizations reported.

Off Capitol Hill, the merger idea has drawn fire from communities that often disagree—business leaders and worker-rights advocates. The Leadership Conference on Civil and Human Rights, a coalition that includes labor unions, the ACLU and others, wrote the administration and Congress on May 26 that the merger would effectively shutter the OFCCP by folding it into the EEOC.

“Both OFCCP and EEOC help advance and protect equal employment opportunity, but they are distinct in their enforcement approaches and expertise, and they should remain separate,” said Leadership Conference CEO Wade Henderson in a prepared statement. “We strongly urge Congress to reject this proposal, which would lead to an erosion of key civil-rights protections for working people.”

Though the merger idea got an early boost from the business-friendly Heritage Foundation, some corporate leaders agree with critics that the agencies should remain separate. Some, including the U.S. Chamber of Commerce, fear the merger would create a mega-regulator with too much power.

”There is a fear in the business community that this newly formed grouping might result in the worst of all worlds from both agencies,” said Randy Johnson, a chamber senior vice president, in a prepared statement. He noted that the EEOC has legal powers the OFCCP does not.

House Passes Comp Time Bill

Hourly workers who’ve had to juggle shift schedules with picking up their kids from school or daycare or attending college classes while holding down a full-time job may have cause to cheer a bill that was passed earlier this week by the U.S. House of Representatives. The Working Families Flexibility Act, sponsored by U.S. Rep. Martha Roby (R.-Ala.), would allow employers to give their workers paid time off in lieu of time-and-a-half pay (i.e., “overtime pay”) when they work more than 40 hours during a single week. The bill  now heads to the Senate, where Sen. Mike Lee (R.-Utah) has introduced a similar measure.

The House bill, which had strong Republican support, was touted as a way to “codify” flexibility for employees.

“I don’t think there’s anything more powerful than giving them more control over their time so that they can make the best decisions for themselves and their families,” said Rep. Cathy McMorris Rodgers (R.-Wash.) at a press conference held by Republican House leaders, reports CNN.

House Democrats were universally opposed to the bill, giving it zero votes. Six House Republicans also voted against it. The bill’s chances of passing the Senate appear uncertain at best: It will need to garner votes from at least 8 Democrats  as well as all 52 Republican senators in order to avoid a filibuster and make it to the desk of President Trump, who’s indicated he will sign it.

“This is nothing but a recycled bad bill that would allow big corporations to make an end-run around giving workers the pay they’ve earned,” said Sen. Patty Murray (D.-Wash.) in a statement. Several similar bills have been passed by the House in recent years but died in the Senate.

The National Partnership for Women & Families has also strongly criticized the bill, saying that it would put too many restrictions on employees’ ability to decide when they’d want to use their paid time off.

If it became law, the Working Families Flexibility Act would give workers “a false and dangerous choice between overtime pay now and time off later when they work more than 40 hours in a week,” writes NPWF Vice President Vicki Shabo in The Hill. “It does this by giving employers the right to hold onto employees’ overtime wages for months, while giving employees no guarantee that they will be able to take their ‘comp time’ when they need it.”

 

Sacrificing Safety or Creating Jobs?

The fate of an Obama-era piece of legislation designed to improve worker safety appears to be anything but safe.

On Monday, the U.S. Senate voted by the slimmest of margins—49 to 48—to eliminate the Fair Pay and Safe Workplaces rule, which was created to “limit the ability of companies with recent safety problems to compete for government contracts unless they agreed to remedies,” as the Washington Post reported this week.

Signed by then-President Barack Obama on July 31, 2014, the executive order required prospective federal contractors bidding on federal deals worth more than $500,000 to disclose their violations of certain workplace protection laws before receiving a contract. The rule also obligated federal agencies to work with noncompliant contractors in an effort to address existing safety-related issues.

The regulation was put on hold, however, by an October 2016 court order determining that it exceeded congressional limits. A measure to abolish it has since made it through the House, and this week’s Senate vote all but assures that will now happen. President Donald Trump is expected to sign off on rolling back the rule—just one of a handful of worker safety regulations the administration is eyeing for elimination.

“This is the opening salvo of the Republicans’ war on workers,” Deborah Berkowitz, senior policy adviser at OSHA, told the Post. “It sends a signal that Congress and the administration is listening to big business and their lobbyists and they are not standing up for the interests of the American workers.”

Meanwhile, groups such as the U.S. Chamber of Commerce and the Business Roundtable contend that the Fair Pay and Safe Workplaces rule hampers businesses’ ability to compete for government contracts, which subsequently reduces jobs.

“Any changes in employment laws proposed by the employer community [are] disingenuously described [by Democrats] as an attack on workers,” Randy Johnson, the U.S. Chamber’s senior vice president for labor, immigration and employee benefits, told the Post. “The left has never seen a regulation they don’t like, no matter how many jobs it kills.”

Sen. Elizabeth Warren (D-Mass.) doubts that the motives behind wiping out this particular rule have much to do with saving or generating jobs.

“Instead of creating jobs or raising wages, they’re trying to make it easier for companies that get big-time, taxpayer-funded government contracts to steal wages from their employees and injure their workers without admitting responsibility,” she said in a Senate floor speech ahead of Monday’s vote.

As the Post points out, the eradication of the Safe Workplaces rule is likely just the first phase of a Congressional movement to “kill Labor Department regulations.”

The “Volks rule,” for instance, could be next.

Adopted in January, the rule was meant to “give OSHA authority to issue citations and levy fines against companies for failure to record illnesses, injuries and deaths that date back as far as five years,” according to the paper.

U.S. Representative Bradley Byrne (R-Ala.) has introduced a measure that would do away with the rule, which he has described as an overreach.

“If you are determined to be a bad actor, you’ll be a bad actor,” Byrne told the Post. “I don’t think this is going to encourage noncompliance. I think OSHA is being lazy on getting its investigations done.”

For their part, Congressional Democrats maintain that rejecting the rule would undermine OSHA’s efforts to enforce safety reporting requirements.

For example, Rep. Robert C. Scott, of Virginia, says doing so would “create a safe harbor for those employers who deliberately underreport.”

The arguments coming from both sides of the aisle with respect to such workplace-related regulations are nothing new, and are sure to continue. But it seems every bit as certain that we’re going to find out what sort of impact taking these rules away will have on workplace safety.

Commander-in-Chief or CEO?

From Truman to Trump, a handful of U.S. presidents have made their way to the Oval Office via the business sector.

If a recent Korn Ferry Institute survey offers any clues, it might be a while before we see another commander-in-chief who’s taken that route.

In a poll of 1,432 corporate executives, an overwhelming majority of respondents showed no signs of aspiring to the highest political office in the land. Given the choice, 85 percent of executives said they would rather be CEO of their own organization than lead the country, according to Korn Ferry.

While recognizing the similar requirements for both roles—the ability to drive growth, manage crises, think strategically and manage finances, for example—most business leaders allow that the president has even more hats to wear.

Indeed, 81 percent of the executives polled said they think the U.S. president has a more complex job than they do.

“In a way, you could consider the U.S. president [to be] the national CEO,” says Rick Lash, senior partner at Korn Ferry Hay Group, in a press release summarizing the findings. “While serving as a corporate CEO is generally considered a very challenging role, executives acknowledge the U.S. president faces hurdles that are much higher than those faced by a leader in corporate America.”

In addition to complexity, you can put compensation on the list of reasons why your CEO isn’t likely interested in leading the free world.

Seventy-one percent of executives, for example, reported feeling that the U.S. president—at $400,000 annually, as determined by Congress—is underpaid. Nearly half (48 percent) said the president should receive at least $10.4 million per year; the current average compensation for a CEO at an S&P 500 company. And exactly 0 percent cited salary/compensation as the top reason someone would want the job of U.S. president. But money, or a lack thereof, isn’t the only thing deterring executives from someday pursuing a presidential run.

The position of U.S. president “comes with extra scrutiny as well,” according to Korn Ferry.

Donald Trump, for example, “has been president for less than a week and he’s been questioned about his every action, from the serious (the words he used during his inaugural speech and his choice of cabinet members) to the silly (whether the dance with his wife, Melania, at an inaugural ball was ‘awkward’),” notes the aforementioned release.

“A corporate CEO may be questioned on his or her firm’s stock price and business strategy, but usually isn’t scrutinized for dancing ability.”

High Anxiety for Plan Sponsors

It’s still unclear whether the incoming Trump administration will take aim at the Department of Labor’s new fiduciary rules, which are slated to go into effect on April 10.  As Joseph Urwitz, a partner in McDermott Will & Emery’s Boston office, told us late last month: “While it’s not possible to predict the future, the new Congress and president may overhaul, eliminate or at the very least delay implementation of the fiduciary rule. Time will tell whether or not any of these moves will come to pass.”

thinkstockphotos-468426388But what we do know is that litigation continues to be very much on the minds of plan sponsors.

This fact received further support earlier this week, when Cerulli Associates, a global research and consulting firm, released the findings of a study—titled “The Cerulli Report: U.S. Retirement Markets 2016”—that found more than half (57 percent) of more than 800 401(k) plan sponsors questioned are concerned about potential litigation.

While much of the litigation has targeted large plans with deeper pockets, the research found that smaller plan sponsors are also paying attention to today’s litigious environment.  Nearly one-quarter of small plan sponsors—those less than $100 million in 401(k) assets—describe themselves as “very concerned” about potential litigation.

As most of you know (and the Cerulli report points out), fee-related lawsuits, in particular, have been something of a theme in 2016, putting added pressure on plan sponsors to find ways to reduce fees. “Plan-sponsor-survey results show that the top two reasons for which 401(k) plan sponsors choose to offer passive (indexed) options on the plan menu are because of ‘an advisor or consultant recommendation’ or because they ‘believe cost is the most important factor,’ ” according to the Cerulli press release. But there is also no denying that lowering the risk of litigation factors into the decision making as well.

The Cerulli report suggests that the rash of litigation that has occurred in recent times is stifling innovation. Jessica Sclafani, associate director at Cerulli, notes that “plan sponsors feel they have little to gain by appearing ‘different’ from their peers due to the risk of being sued. This mindset can make plan sponsors reluctant to adopt new products … .”

The Zenefits Saga Continues

It appears Zenefits woes are continuing—and if the predictions of one consultant are correct, they aren’t likely to end anytime soon.

Yesterday, Washington State Insurance Commissioner Mike Kreidler ordered Zenefits to “cease free distribution of its employee benefits software, noting the tactic violates Washington state insurance law against inducements,” his office’s statement reads.zenefitslogo

Washington is said to be the first state to take action against the company for violating inducement laws. Under an agreement with Kreidler, Zenefits can challenge the order within 90 days.

The state took issue with the fact that Zenefits required clients to designate it as its broker of record and then collected insurance commissions from the products it sold in order for them to access its free software.

“The inducement law in Washington is clear,” Kreidler said. “Everyone has to play by the same rules.”

Following the announcement, Zenefits’ General Counsel Josh Stein posted the following on the company’s website

“Today, Zenefits has reached a compromise agreement with the Washington Office of the Insurance Commissioner (OIC) on how Zenefits will price its services in Washington State.  Beginning January 1, at the order of OIC, Zenefits may no longer provide free software services in Washington. As a result, Zenefits will charge all Washington state customers $5 per employee per month for our core HR product.”

Stein went on to say …

“The Washington viewpoint is a decidedly minority view. Since its founding, Zenefits has had conversations with regulators about our business model, which includes some free HR apps. Many states have looked into the issue and concluded that free software from Zenefits is not a problem; in fact, it’s in the interest of consumers. Only one state other than Washington has disagreed.  Utah’s department of insurance tried to force Zenefits to raise prices for consumers, and Utah’s state legislature and governor quickly took action, passing a bill to clarify that its rebating statute should not be interpreted to prohibit innovative new business models that deliver value to consumers.”

Earlier today, I spoke with Rhonda Marcucci, partner and consultant in Gruppo Marcucci, a Chicago-based HR and benefits technology consulting firm.

Zenefits has created its own regulatory scrutiny reputation for the rest of its life, Marcucci told me. In this case, she said, “I don’t think it is driven so much by the brokers but by the insurance departments who are extremely angry about the licensing piece—so that now invites more scrutiny in other places. Brokers may have brought it to [the attention of insurance regulators], but the way I look at this, Zenefits is a regulatory penalty box—and they will be, I think, forever.”

Marcucci noted that every state, except for California, has some kind of no rebating or inducement laws for transactions. But that doesn’t necessarily mean that every employer is following the law.

At the end of day, she said, states typically base their decision on enforcing these laws by “who screams the loudest.”

As far as Zenefits is concerned, Marcucci said, it’s realistic to expect that other states might follow Washington’s lead, especially those states with difficult regulatory insurance environments such as New York.

The Gig Economy: Pros and Cons

More than one in 10 working Americans have joined the so-called gig economy, working as freelancers or independent contractors, according to a survey of 1,008 people from ReportLinker. A third of respondents said they would consider exiting the traditional workplace to work in the gig economy, while nearly half said they would be willing to consider doing so within the next three years.

Why would so many consider giving up the security and benefits of a full-time job for the uncertainties of gig work? Twenty eight percent of survey respondents cited “being your own boss,” while the ability to work flexible hours came in second. Nearly 40 percent of job seekers say they’d consider becoming an independent contractor, as would 59 percent of part-time workers and 33 percent of students, according to the survey.

The lack of benefits is a drawback for those working in the gig economy, however, with one in four of the respondents who work as freelancers citing the lack of retirement benefits as a downside. Indeed, the lack of traditional job benefits such as sick-leave pay and unemployment benefits has led the United Kingdom to appoint a team of four experts to review the impact of “disruptive” businesses such as Uber and Deliveroo on that nation’s workforce, reports the BBC. The panelists include Matthew Taylor, chief executive of the Royal Society for the Arts.

“One of the key issues for the review is ensuring that our system of employment rules are fit for the fast-changing world of work,” Taylor writes in a piece for the Guardian newspaper.

“As well as making specific recommendations, I hope the review will promote a national conversation and explore how we can all contribute to work that provides opportunity, fairness and dignity,” he told the BBC.

The lack of benefits typical in most gig economy jobs has resonated Stateside as well, of course, with a number of gig workers filing suit alleging that they’re actually employees, not independent contractors, and are thus eligible for benefits such as unemployment compensation. In response, companies that employ freelancers are pushing for bills that promote “portable” benefits that workers would be able to take from job to job. Online home-cleaning company Handy, for example, is circulating a draft bill in the New York State legislature that would establish guidelines for portable benefits for workers in that state’s gig-economy companies, reports Reuters. The bill would classify workers at companies choosing to participate in the program as independent contractors rather than employees under state law, as long as the companies’ dealings with their workers “meet certain criteria.”

Not all are pleased with the bill. Larry Engelstein, executive vice president of 32BJ Service Employees International Union, criticized it as offering workers too little.

“The amount of money that’s supposed to be put into these portable benefit funds seems so meager,” Engelstein told Reuters. “The actual benefit a worker is getting hardly warrants what the worker is giving up.”