CEO Turnover vs. CEO Tenure: Two Takes

Interesting, somewhat divergent reports on CEO longevity appeared recently from some big-name research consultancies. 178083845--CEOsuccessionOne, a study from Equilar compiled for CNNMoney, shows tenure for S&P 500 CEOs has increased nearly a full year since 2005. As the CNN report states,

A decade ago, CEOs typically spent five years at the helm of one of America’s top 500 publicly traded companies. It might seem like a small increase, but it’s a notable shift from the Great Recession and financial crisis when a lot of executives got fired. Those who survived — or came on board in the new wave — are keeping their posts.

In fact, more specifically, according to Equilar’s report on the study it performed, “in 2014, the average S&P 500 CEO had served an average of 7.4 years, and 6.0 at the median. Ten years ago, those figures were 6.6 and 5.2, respectively.”

Equilar claims there’s “one simple explanation” for the rising average: a collection of long-standing CEOs at the top of the list, people like Berkshire Hathaway’s Warren Buffett, who’s held his post for 45 years, and L Brands’ Leslie Wexner, who sits at the top of the list with 52 years at his company. As soon as these top guns start to retire, you’ll see the average tenures start to fall, says Equilar.

But for now, they’re a full year higher than they were a decade ago.

Juxtapose that with the latest report from Challenger Gray & Christmas, as reported in the Center Valley Business Times — showing a jump in CEO departures toward the end of 2015. Specifically, December CEO exits were 33 percent higher than the 86 changes in November and 7 percent higher than the 107 CEO departures in December 2014.

(Despite the December surge, though, the yearly total of 1,221 CEO departures in 2015 was 9 percent lower than the 1,341 departures in 2014, according to the Challenger report.)

So are CEOs staying or going? Hard to say.

But whatever the numbers tell us, this post can also serve as a reminder that it’s never too early to put your best foot forward in devising the best CEO-succession plan for your organization. This post by me almost two years ago suggested then there was still much improvement needed in this area. (That March 2014 post also shows a decline in CEO turnover at the start of that year.)

At least we can say, with CEO turnover holding fairly steady and tenure on the rise, there’s some time, at least, to get succession at the top post right.

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Giving Parental Leave a Major Boost

480711436In the United States, paid maternity, paternity and adoption leave continues to be fairly rare. Indeed, the Society for Human Resource Management’s 2015 Employer Benefits Survey reports that about 21 percent of employers provided paid maternity leave in 2015 and 17 percent offered paid paternity or adoption leave.

Lately, it’s been “new-economy” companies like Apple, Netflix and Microsoft that have been getting much of the attention on this front. But as we were reminded earlier this week, “old-economy” companies are jumping on this bandwagon, too.

Dow Chemical, founded in 1897 by Herbert Henry Dow, announced on Wednesday the launch of its Global Parental Leave Policy, giving a minimum of 12 weeks paid leave to mothers and two weeks paid leave to non-birthing parents. Leave can be taken during the 12 months following the birth of a child.

The enhanced Dow policy also supports requests to limit travel for new mothers during the first year following the birth of a child and assists nursing mothers who are required to travel for company business through the reimbursement of the cost of packaging and shipping of breast milk.

Further, it provides company-wide nursing rooms and breast-pump assistance, a family illness policy, and counseling and support through its Health Services group.

Dow’s CHRO, Johanna Söderström, pointed out in a press release  that the expanded policy reinforces the company’s strong support for the well-being of its employees and their families.

As a piece featured last year on the Entrepreneur website notes, Dow Chemical joins other more traditional employers that offer “radically awesome” leave policies for new parents, such as Johnson & Johnson, Bank of America and Goldman Sachs.

Anecdotally, there seemed to be a decent amount of movement on the paid time-off-for-parents front for organizations of all types in 2015—so it wouldn’t be surprising to see the needle move some when SHRM releases its next survey.

Assuming that turns out to be the case, one would think the uptick was due in part not only to significant media coverage this issue has been getting in recent months, but also to the growing recognition by employers that it’s the right direction to be heading in—both for employees and themselves.

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Human Capital a Top Concern in Public Sector

Since the Great Recession began and even afterward, state and municipal governments have been slashing their payrolls, implementing mandatory unpaid leave for employees and cutting back on once-generous health and retirement benefits. Now the after-effects of those cutbacks appear to be coming home to roost, a new survey finds.

Exterior of the Iowa State Capitol

Exterior of the Iowa State Capitol

Ninety percent of state and local government employees from all 50 states and the District of Columbia consider human capital issues to be a challenge for their organization, according to a nationwide survey from the Government Business Council and  Route Fifty, a digital business-to-business publication from the publisher of Government Executive. Only 41 percent of the 928 individuals surveyed (more than half of whom hold executive-level roles) believe their organization is prepared for the looming baby boomer retirements. And just 40 percent indicate their organization is competitive with the private sector in its ability to recruit and hire talent.

That last item seems to weigh heavily on the minds of public-sector leaders these days, and for good reason. The generous pension benefits commonly associated with public-sector jobs do not appear to have the same lure for today’s younger candidates than in the past, according to the Pew Charitable Trust’s 2014 Recruiting and Retaining Public Sector Workers study, which is based on interviews with state HR officers.

As Sara Walker, director of the West Virginia Division of Personnel, explained:

“People who have been with the state are invested in being state employees and being able to retire from the system. They understand what’s waiting for them. But the generation that’s coming in—I don’t know that the pension plan would retain them because they’re mobile. They’re going to move. We’ll have to figure out how to have continuity of services with a generation that is a revolving door.”

Eugene Moser, former director of the New Mexico State Personnel Office, noted that younger workers tend to move much faster between jobs than the previous generation. For mobile workers like these, traditional pensions based on years of service obviously hold less appeal.

Lee-Ann Easton, administrator of the Nevada Division of Human Resource Management, said younger workers have different work-related priorities: “We are finding that the younger generation who grew up on technology wants more flexibility in their careers such as flexible hours and the option to telecommute. Pay is always a factor as well, but flexibility and telecommuting appear to be gaining in job satisfaction above retirement benefits.”

The study noted that several states, such as Vermont, are experimenting with offering new hires a choice between enrolling in a traditional defined-benefit plan or a new defined-contribution offering, including a hybrid option. And in the future, there may not be a choice: The huge unfunded pension liabilities facing many states is leading many traditional supporters of pensions — including Democrats — to support big changes that would end or significantly alter these benefits.

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Not So Hot on Holacracy at Zappos?

Many of us were introduced to the concept of holacracy by way of Zappos, which famously began phasing in this management model—or non-management model, as it were—in 2013.

Zappos’ adoption of holacracy—which eliminates managers and distributes authority among sovereign, self-organizing teams—was greeted by observers as a big and bold step. The move might have seemed even more radical had it been made by most any CEO not named Tony Hsieh.

In his 15 years at the helm of the Las Vegas-based online shoe and clothing store, Hsieh has earned a reputation for employing innovative and unconventional people practices. His progressive approach has worked too, as Zappos has become an online retail giant and one of Fortune’s “100 Best Companies to Work For.”

It’s no secret, however, that holacracy hasn’t been universally embraced by the Zappos workforce.

This past April 8, Hsieh sent a memo notifying his approximately 1,500 employees that the organization would be accelerating its implementation of the holacracy system, which Hsieh felt wasn’t moving quickly enough. The following month, the company reported that 210 workers would be leaving voluntarily, rather than sticking around to see how this whole holacracy thing works out.

Fast forward eight months, and it seems that many Zappos employees still aren’t sold.

A recent Atlantic article reports that 18 percent of Zappos’ staff has taken buyouts in the last 10 months, bringing the company’s 2015 turnover rate to 30 percent—10 percent above Zappos’ typical annual attrition rate.

The same piece delves into the possible reasons why this new manager-free structure may be driving workers away, and concludes that the system might be doing as much to confuse employees as it is to empower them.

To wit: Atlantic Associate Editor Bourree Lam references a 2015 New York Times article in which payroll employees shared their struggles in determining salaries once holacracy was put in place and job titles were effectively abolished at Zappos.

For its part, Zappos maintains that holacracy and its disdain for traditional hierarchies has had little bearing on recent turnover rates.

In fact, a Jan. 15 statement posits that last year saw employees leaving in larger-than-usual numbers “not because of anything related to holacracy or Teal, but because the economics of the offer were too good to pass up.”

(“Teal,” if you’re wondering, is the state of self-organization that author Frederic Laloux describes in his 2014 book Reinventing Organizations. Within Zappos, the “Teal Offer” is a version of the company’s long-standing proposal in which employees who aren’t 100 percent on board with the organization’s plans for the future can opt for a buyout. In the aforementioned memo, Hsieh announced that those who felt the new self-management style wasn’t for them would be offered at least three months’ severance if they chose to leave.)

According to this statement, the company says the 10 percent spike in turnover in 2015 “was mostly due to us giving long-time employees the opportunity to pursue their dreams.”

For example, some long-time employees were offered more than a year of severance or one month for every year worked, whichever was greater. Meanwhile, other veteran workers were offered the same severance, as well as the chance to rejoin Zappos after 12 months, which “allowed people the opportunity to pursue their new startup ideas, or take time off to take care of that sick relative, for example.”

That may smell a bit like spin, but Zappos maintains that the number of employees who have taken “The Offer” is in line with what the company expected.

Be that as it may, the retailer has certainly taken a hit since adopting holacracy, losing more than 200 workers and evidently ruffling the feathers of at least some who stayed.

It will be interesting to see how, if at all, the hoopla surrounding holacracy affects Zappos’ employment brand beyond the short-term. Given Hsieh’s track record, I think it’s a safe bet that Zappos will fully recover. Lam seems to agree.

“ … It’s clear,” she writes, “that Zappos is going through a rough transition—one that it anticipated, and one that could make it stronger in the end.”

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Charging Candidates for Job Interviews

Truly, airlines really WILL charge you for everything these days. Witness:

A new low-cost Spanish airline, Air Europa Express, has allegedly been charging job candidates €60 (or approximately $65) for the opportunity to interview for its 250 available pilot and cabin crew positions, according to this recent USA Today post

Representatives from a pilots union and from Unión Sindical Obrera, a trade union, have slammed Air Europa Express for its unsavory (and possibly illegal) hiring procedures. USO spokesperson Isaac Valero told the Telegraph:

“If they asked for 60 euros this time, what may they charge the next time? Faced with an ever more precarious labour market with over 20 per cent of the active population out of work, this is clearly a disgraceful and abusive new measure which only contributes to making it harder for people to access employment.”

Spain’s 21-percent unemployment rate is the second-worst in Europe (after Greece). A spokesperson for the Spanish Guild of Commercial Aviation Pilots called the charge illegal and “immoral,” saying that any candidates should be evaluated based on their experience and qualifications, not by their willingness to swing by an ATM.

According to the USA Today post, Air Europa — Spain’s third-largest airline and parent company of Air Europa Express — has not confirmed that it expected candidates to pay for interviews.

But given the sluggish Spanish economy, can you really fault candidates for paying up just to get a shot at a job?

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How Favoritism-Free Do You Really Want to Be?

Here’s an interesting question for you to ponder on Martin Luther King Day, posed in this piece by Simma Lieberman on the Workforce 478884006 -- hiring biasDiversity Network: “Before you spend your next dollar on unconscious-bias training, ask yourselves if you just want people to have a good day, [and] forget or not apply what they learn, or if you want ongoing change that will make you a benchmark organization and the employer of choice.”

Though she doesn’t exactly say the former is generally what happens in companies that espouse diversity transformations, it’s implied in her piece, How Can Unconscious Bias Training Go Wrong?

Basically, she says, if you really want to establish a meaningful and effective diversity and inclusion culture without favoritism, one that results in “breakthrough innovation, [you need to instill] transformation at every level, risk-taking and the willingness to be uncomfortable.”

And that starts at the top, she says: “The CEO and other people on the executive team need to be the first ones to learn about unconscious bias and how it impacts their leadership behavior. We have our clients take the Implicit Association Test from Harvard, to be aware of their own biases. Transformation begins at the top and doesn’t stop!”

In her helpful numbered list of ways to add value to unconscious-bias training, Lieberman also stresses the need to “involve and seek input from people who manage all levels of the recruiting process. They need to be aware of their unconscious bias in the whole hiring process from where and how they recruit, how they write the job description, how they conduct the interview, and ways in which they develop rapport,” she writes.

Which reminds me of a piece I posted last Martin Luther King Day,  “Favoritism is No Friend of Diversity.” In it, Kansas City Star writer Michelle T. Johnson gets at the heart of just how insidious and nebulous favoritism is among managers and HR leaders when they’re making personnel decisions:

“What does favoritism even look like? Favoritism is usually about choice. In some workplaces, the work and the people who do it don’t have much variance in how the work is done and who does it. However, in other workplaces, work decisions are made frequently — assignments, shifts, territories, days off. With most decisions come subjective judgments. Every industry and workplace is so different, yet everyone can probably relate to some area of the job that bosses influence [subjectively] at least weekly.

“People are quick to defend their decisions, saying they base them on the best person to do the job. But over time, what conditions have you created to allow, for example, one person to inevitably do the job better than another? And if that has happened, what is the reason? Is it that the person reminds you of yourself or has similar interests, or because the person has a personality you find easier to get along with?”

Dave Kipe, chief operating officer for New York-based ABCO HVACR Supply + Solutions, who describes himself as “passionate about leadership behavior and the impact it can have in our workplace and our lives,” got back to me after that favoritism post, underscoring the need for business leaders to be more “self-aware and conscious of their implicit behavior [and bias-tinged] body language.” He calls their failures in this regard a “pitfall many leaders fall into, but don’t even acknowledge exists.”

I reached out to him about Lieberman’s post as well, considering how closely intertwined unconscious bias and favoritism are. He had a lot to say:

“I think most of us have this inflated self-perception that we are unconditionally ethical and perfectly unbiased. We are confident in our decision-making abilities and proud that we are ‘great judges of people.’ However, research has shown that’s simply not true.

“In Lieberman’s case in point, the employees embraced the ‘unconscious bias’ training, but the company didn’t sustain that focus; therefore, nothing changed. Her point that ‘there is an unconscious — and sometimes conscious — bias that people at the lower levels don’t need to be involved or won’t understand the new culture’ really resonated with me. Company leaders must engage the entire organization and drop the narcissistic attitude that employees are just too dumb or too ignorant to understand.

“Unconscious bias in the workplace is seldom discussed, but it’s impact is deep and, if uncontrolled, it can be destructive. Training is a critical component of creating a culture of inclusion, but it’s money and time wasted if not supported by the organization.”

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Dusting Off the HR Tech Crystal Ball

It’s the beginning of a new year—and you know what that means. It’s time for folks to come out of the woodwork offering up their predictions for 2016.

ThinkstockPhotos-57451523Yesterday, Josh Bersin, principal at Bersin by Deloitte, joined the club with his report titled “Predictions for 2016: A Bold New World of Talent, Learning, Leadership and HR Technology Ahead.” As you might expect, it included a pretty strong bent toward technology.

I suggest you take a few minutes to read Bersin by Deloitte’s nicely crafted report. But before you do, I’d like to take a moment to share a brief conversation I had with the author earlier this week about his vision of the future.

Specifically, I asked him what he thought was the boldest prediction among the group.

In response, he was quick to point to the first item on his list: “Digital HR arrives!” In certain ways, he explained, digital HR runs through each of his nine other predictions.

“If you look at the evidence of what’s going on in the spheres of HR and talent management,  the challenges include engagement, culture, employment brand, dealing with millennials [and] skills development,” he said. “ If you add these up and throw them into a bucket, you would have to say everything in HR has to happen faster … . But the reality is it can’t. HR isn’t going to be twice as big and it’s not going to become twice as productive in solving these problems. So how [does it happen]. Well, the answer is that just as businesses are becoming more disruptive, HR is [starting to] disrupt itself through digital technologies.”

Today, he explained, everything is now being done through digital technology—“people learn, they’re recruited, they get information, they manage their time, they schedule their vacations”—and that is only going to continue to grow. “Unlike the computer, the phone knows where you are, it might even know your heart rate, and it interacts with you in a much more dynamic way than email or a form on a computer.”

Bersin pointed to the concept “design thinking”—an approach that’s used in other parts of the organization and is beginning to creep into HR. In solving a talent, recruiting or learning problem, he explained, you no longer just buy a solution, but you think about the user and change his or her experience.

He cited a recent trip he took to India, where he visited a company that was doing all of its recruiting through mobile phones. “People took a photograph of their citizenship documentation and emailed it into the recruiting process … .”

It represents just one of many examples of how HR is disrupting itself, he said.

As for the other nine predictions, here’s a quick, edited summary from the  press release …

  • The stampede to replace dated HR systems will accelerate. As HR organizations strive to build true ‘”systems of engagement” (versus systems of record), look for ease of use, integrated data and analytics to drive a massive transformational shift—away from traditional licensed HR software to a new breed of integrated HR and talent tools in the cloud.

  • New models of talent management breed a new generation of talent management systems. For example, the redesign of performance management to an often rating-less model is driving the need for talent management software built around feedback-centric systems.

  • The rush to replace and re-engineer performance management will accelerate globally. Many organizations around the world are moving away from top-down annual performance processes.

  • Engagement, retention, and culture will remain top priorities as new feedback tools come to market. As the competition for talent remains fierce, we expect the topics of culture and engagement will remain high on the list of concerns. Look for new tools, techniques and analytics methods to encourage and collect employee feedback and help leaders understand where culture and management should change.

  • Global leadership development, coupled with career and talent mobility, will take on a fresh new focus. Mentoring and coaching will grow rapidly. Our high-impact talent management research shows that coaching and mentoring are the most valuable talent practices to develop in an organization. These activities should be built into an organization’s culture, rewarded and include the use of technology tools to bring in external coaches.

  • The revolution in corporate learning will continue as a new model evolves. Our research … shows the most effective learning involves education (formal training), experiences (developmental assignments and projects), environment (a culture and work environment that facilitates learning), and exposure (connections and relationships with great people).

  • Diversity and inclusion will move beyond compliance and become a strategic part of business and talent management. Organizations that align diversity and inclusion practices to business objectives are more likely to perform well on financial outcomes.

  • People analytics likely will evolve to become a mainstream program in the HR function. Using new data streams coming from mobile, engagement, and feedback applications and network analysis, organizations are building valuable databases about what people are doing, their history, experiences at work and career progress.

  • The HR profession leaps forward as a new breed of HR leaders emerges. Companies are investing heavily in innovation and analytics, organizations are sharing creative solutions more openly and HR’s alignment with business is improving dramatically. Look for 2016 to be a year of positive changes in multiple areas of HR and for a new breed of innovative and strategic HR and L&D leaders to come to the forefront.

Twelve months from now we can revisit Josh Bersin’s list of predictions to see how many have come to pass. But at least for now, we might want to consider which of these deserve further consideration in our own organizations.

Here’s my prediction: It probably includes more than a few.

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The Perils of Anonymous Feedback

A number of firms have reached out to us recently about their internal feedback tools, which they say can increase engagement and improve performance by letting employees send their colleagues kudos or offer constructive criticism. Now that “continuous performance management” is officially a thing, it would seem that the time is ripe for HR leaders to push for rolling out these tools within their organizations.

They might want to proceed cautiously, however, after reading Quantum Workplace’s Natalie Hackbarth, who reminds her readers that the New York Times’ less-than-flattering expose on Amazon’s workplace culture last August included details of how employees used the company’s Anytime Feedback Tool to slam and criticize each other, leading to what sources described as a “bruising workplace” and “purposeful Darwinism.”

Now if “purposeful Darwinism” is the sort of workplace culture that you and your CEO are aiming for, then have at it. For everyone else, Hackbarth included some advice and perspective from industry thought leaders on the lessons learned from Amazon’s experience.

Here’s Bersin by Deloitte’s Josh Bersin on the matter:

“Our research shows that companies that value open feedback and communication outperform their peers. This does not mean, however, that an anonymous feedback tool should let employees do away with respect, honesty, confidentiality, and fairness. We urge companies that use these tools to set guidelines in place, and communicate that nobody should say anything online that they would not say in person.”

And here’s Paul Hebert, an engagement and recognition consultant:

No one ever erred by underestimating human behavior. I’m sure that when Amazon did this some guru said it was the future of employee reviews—transparent and real time. This is why we shouldn’t blindly follow outliers and try to emulate who we ‘think’ is doing it right. Yes, even Amazon can make big mistakes. Transparency without accountability is a cesspool.”

And finally, here’s John Whitaker, of HR Hardball, whose last line I find especially memorable:

“Many business leaders will see this as a justification for not employing feedback tools that offer a wonderful way to build engagement. This story only justifies the paranoia many already feel about an open forum for employees to vocalize. Don’t bury the lead, though—the real story is the reflection on Amazon’s culture. When you create a culture of fear, don’t hand the inmates a shiv.”

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Employee Weight Loss Takes More Than Money

Generally speaking, financial incentives seem like a pretty effective way of motivating employees to do many things.

New research from the University of Pennsylvania, however, suggests that it may take more than the promise of cold hard cash to help employees shed unwanted pounds.

In the study, which appears in the January issue of Health Affairs, 197 obese employees of the University of Pennsylvania health system were enrolled in a workplace wellness program. These workers were given a weight-loss goal equivalent to 5 percent of their weight at enrollment, and randomly assigned to either a control group that wasn’t offered any financial incentive for reaching that goal, or one of three “intervention arms” in which participants were offered an incentive valued at $550.

Two of these intervention arms used health insurance premium adjustments, which were either delayed until the beginning of the following year, or took effect in the first pay period after achieving the goal. Employees in the third intervention group, meanwhile, were entered into a daily lottery incentive. Twelve months after enrollment, the researchers saw no significant changes in average weight loss for participants in any of the groups.

While offering financial incentives didn’t yield vastly different results among this particular group of employees, the study’s authors point out that such incentives aren’t necessarily useless, and that a variety of factors may have contributed to this outcome.

For example, lead author Dr. Mitesh Patel, an assistant professor of medicine at the University of Pennsylvania’s Perelman School of Medicine, suggests in a press release that the discount offered to these employees may not have been substantial enough. Or, the way the reward was delivered may have affected some employees’ perception, he said, noting that the premium discount was rolled into a paycheck as opposed to being made in a separate payment.

“More than 80 percent of large employers use financial incentives for health promotion. Many use health insurance premium adjustments, but these incentives are often delayed, and even when they aren’t, they are typically hidden in paychecks along with other deductions and payments,” says Patel. “That makes them less noticeable. Our findings suggest that employers should consider testing designs alternative to the $550 premium-based incentives used in this study.”

In addition, the lottery incentives used in this study “were constrained by having to do weigh-ins in workplace settings,” adds Dr. Kevin Volpp, a professor of medicine and healthcare management and a co-author of the study. “That made sustained engagement and behavior change more challenging.”

Given such variables, co-author Dr. David Asch, a professor of medicine and healthcare management and director of the Penn Center for Health Care Innovation, agrees that the lack of significant weight loss among participants in this study “doesn’t mean that all incentive programs are ineffective.”

Rather, the findings only signify that “we need to move to more creative designs,” he says, “that might better leverage predictable barriers to behavior change.”

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Coming to the Aid of Unpaid Interns

The U.S. House of Representatives passed a bill last night that would extend new protections to unpaid interns in the federal government, but it’s anyone’s guess whether the legislative branch will enact a similar law for unpaid interns in the private sector.

According to the Huffington Post:

The bill would close a loophole in federal law that carves unpaid interns out of the Civil Rights Act. Current law does not acknowledge unpaid interns as employees, leaving them without remedies if they encounter discrimination based on race, sex, age or religion. The proposed legislation would allow unpaid interns to sue the government in federal court if their rights were violated.

The bill, the Post notes, is one of a trio introduced by Democrats looking to extend civil rights protections to unpaid interns in all U.S. workplaces. The other two would apply to unpaid interns working in congressional offices and to the private sector at large. The bills are being sponsored by Rep. Elijah Cummings (D-Md.) and Reps. Bobby Scott (D-Va.) and Grace Meng (D-N.Y.)

Of course, the legislation aimed at private businesses would have the biggest impact on employers, as well as the tallest hurdles to overcome. Republicans in both chambers have been reluctant to impose any new regulations on businesses, particularly ones that can lead to lawsuits from workers.

Scott said yesterday that, given the passage of the federal portion of the legislation, he was calling on leadership of the Education and the Workforce Committee to take up the private-sector companion bill.

There’s no word on when (or even if) Congress will take up the other two pieces of legislation aimed at unpaid interns, but if your company operates an “unpaid intern” component within  its workforce, then you would be well-served to keep an eye on the status of this proposed legislation.

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