Hrprofessionalsmagazinedec2012

Volume 2 : Issue 12 TM

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2013 Salary Expectations

Cliff Jumping How Washington Deals with the “Fiscal Cliff”

DOL Benefit Plan Audits

Use of Mandatory Arbitration Programs in Mississippi NLRB Guidance on Employment at Will for Employee Handbooks

Michael Layman

SHRM’s Manager of Employment and Labor Policy

Bringing Human Resources & Management Expertise to You

3%

2013 Overall Average Salary Budget

www.HRProfessionalsMagazine.com Editor

Cynthia Y. Thompson, MBA, SPHR Publisher

The Thompson HR Firm HR Consulting and Employee Development Art Direction

Park Avenue Design Contributing Writers

Jennifer Blake Alex Boals Craig Cowart Latosha Dexter, SPHR Voss Graham J. Gregory Grisham Linda Lauer Michael K. Layman Lisa Lichterman Leach Geoffrey A. Lindley Lisa P. May Rusty Turner Julieanna Walker, PHR Board of Advisors

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

Editorial content does not necessarily reflect the opinions of the publisher, nor can the publisher be held responsible for errors.

HR Professionals Magazine is published every month, 12 times a year by the Thompson HR Firm, LLC. Reproduction of any photographs, articles, artwork or copy prepared by the magazine or the contributors is strictly prohibited without prior written permission of the Publisher. All information is deemed to be reliable, but not guaranteed to be accurate, and subject to change without notice. HR Professionals Magazine, its contributors or advertisers within are not responsible for misinformation, misprints, omissions or typographical errors. ©2011 The Thompson HR Firm, LLC | This publication is pledged to the spirit and letter of Equal Opportunity Law. The following is general educational information only. It is not legal advice. You need to consult with legal counsel regarding all employment law matters. This information is subject to change without notice.

Features 4 Note from the Editor 5 Profile: Michael Layman

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8 Update on HR Public Policy: The Fiscal Cliff 13 PeopleFirst Partnership

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14 Use of Mandatory Arbitration Programs in Mississippi

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22 Is the HR Team Leading the Performance Management Process?

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23 Using Social Media Evidence in Termination Decisions 25 The Big Business of Fraudulent Degrees 29 Daphne Large Named 2013 NCRA President 34 Betsy Weintraub Named to MBJ’s Forty Under Forty

Departments

Columns

16 Compensation: Salary Expectations for 2013

11 SHRM-Memphis Bulletin

19 NLRB: Guidance on Employment at Will for Employee Handbooks

12 SHRM-Memphis Who’s Who?

21 Leadership: Sharing the Power of Cheerful Giving with Sean Tuohy 27 ADA: Requiring Employees to Seek Counseling 30 Benefits: DOL Benefit Plan Audits 32 FMLA: Navigating a Regulatory Minefield 35 Health Care Reform: 2013 PPACA Checklist

Industry News 6 WT SHRM 2012 Fall Employment Law Conference 34 Arkansas, Mississippi, and Tennessee SHRM State Councils

Next Issue Highlights from the Strategic Leadership for HR Executives Seminar featuring SHRM’s Lisa Horn and the Kickoff of Workplace Flexibility in Tennessee www.HRProfessionalsMagazine.com

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a note from the Editor

hat an exciting month November was! We kicked off the month with the SHRM-Memphis Executive Roundtable meeting on November 1st. Our speaker was Kevin Nieman, Chief Learning Officer at First Horizon Corporation. His topic was “The Hidden Traps in Decision Making” based on a recent article in The Harvard Business Review on how we allow memorable events in our past to bias our views of current situations. Kevin has promised to write an article on this exciting topic for our January 2013 issue.

During the month of December, I hope you will take time to give something back to the HR community we love. If you are a member of SHRM, you are probably aware of the work that the SHRM Foundation does for our community. The SHRM Foundation is a leading funder of HR research. Over the past three years, the SHRM Foundation has awarded more than $1.8 million in grants to fund academic research in HR management practice. The Foundation also awards $170,000 annually in education and certification scholarships to professional and student SHRM members, and doctoral students.

If you would like to be a part of this work from which we all benefit, join me in making a donation in honor of someone who made a difference in your life this past year. http://www.shrm. org/about/foundation/contributions. Best wishes for a season of abundant joy and peace.

We traveled to Jackson, TN on November 7 for the WT SHRM Annual Fall Employment Law Seminar sponsored by Rainey, Kizer, Reviere, & Bell at the Carl Grant Events Center on the lovely campus of Union University. Congratulations to John Carbonell, 2012 WT SHRM President, and the WT SHRM Board of Directors on an outstanding conference! The theme was “Smooth Sailing for HR Compliance.” We hope you enjoy reading all about it on pages 6 and 7.

What an honor to have Michael Layman, SHRM’s Manager of Labor and Employment Policy on the cover this month! Don’t miss his article on how Washington deals with the impending “fiscal cliff” on page 8-9. Michael addresses what the “fiscal cliff” means for HR professionals based on these five elements; sequestration and spending caps, the expiration of the Bush tax cuts, expiration of unemployment benefits, and the debt limit increase.

Photo (L-R) Dr. Ted Cook, EMR, at Newton Medical Center in Newton, KS; Cynthia, and Todd Tangeman, HR Director for Newton Medical Center, at a reception hosted by Wesley Medical Center in Kansas City at the Kansas Hospital Association Convention on November 15. The Convention was held at the Sheraton Overland Park Hotel at the Convention Center in Overland Park, KS. Cynthia was the luncheon speaker at the Kansas Hospital Human Resources Association meeting on November 16.

Happy holidays,

Cynthia Y. Thompson | Editor cynthia@HRprosMagazine.com www.HRProfessionalsMagazine.com

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

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on the cover

Michael LAYMAN MICHAEL LAYMAN Manager, Employment and Labor Policy Society for Human Resource Management

Michael Layman is SHRM’s Manager of Employment and Labor Policy. Michael promotes SHRM’s views on employment, labor relations, and civil rights legislation with House and Senate offices and the Administration. He also serves as Chair of the National Coalition to Protect Family Leave, a broad-based group of organizations, companies and associations dedicated to protecting the integrity of the Family and Medical Leave Act and supporting public policy that promotes voluntary, employer-provided leave benefits to maximize flexibility for both employers and employees.

He has delivered speeches around the country on public policy issues, and has been interviewed by numerous national publications on human resource policy, including the Wall Street Journal, Kiplinger’s, National Journal, Roll Call and the Chicago Tribune.

Prior to joining SHRM in January 2007, Michael spent over five years on Capitol Hill, where he served as Legislative Director for U.S. Representative Tim Murphy of Pennsylvania and Professional Staff Member of the House Government Reform Committee staff under Chairman Tom Davis of Virginia.

Michael earned a Bachelor’s degree in Speech Communication from the University of Illinois at Urbana-Champaign and Master’s degree in Business Administration at Georgetown University. 

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Fall 2012 Employment Law Seminar

2013 WT SHRM Board of Directors (L-R) Lisa Kincade, President; Lindsey Pullen, Secretary; Amy West, VP | President-Elect; John Carbonell, Past President; Casey Smith, VP | Membership; Rhonda Livingston, Certification Chair; Jennifer Howell, Communications Coordinator; Sherry Owens, Treasurer (not pictured)

The West Tennessee Chapter of the Society for Human Resource Management’s current membership includes over 70 HR professionals from a variety of businesses and organizations in West Tennessee.

Meetings are held on the third Tuesday of the month at the Carl Grant Events Center on the campus of Union University. Each monthly meeting provides an opportunity to network with other West Tennessee HR professionals.

Additionally, two conferences are held in the Spring and Fall of each year on a variety of topics. These conferences provide a forum to enhance the professional development and growth of human resource practitioners.

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Smooth Sailing for HR Compliance The theme of the conference was “Smooth Sailing for HR Compliance.” Rainey, Kizer, Reviere & Bell PLC were sponsors of the conference. The conference was held at the Carl Grant Events Center at Union University in Jackson, TN. Topics covered were: Leaves of Absence FMLA Independent Contractor vs Employee Union Avoidance Workplace Technology Employee Appearance Employment Law Update

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1 (L-R) John D. Burleson, Managing Partner of Rainey, Kizer, Reviere & Bell; Matt Courtner, Associate with Rainey Kizer; Latosha Dexter, SPHR, and Of Counsel with Rainey Kizer; Gregory D. Jordan, Professor of Business Law & Ethics at Union University in Jackson and Of Counsel with Rainey Kizer; Casey Smith, Administrator with Rainey Kizer; and Geoffrey Lindley, Partner with Rainey Kizer. 2 Rhonda Lee, Human Resources Manager at Caterpillar Inc., located in Dyersburg, TN, discussed “Third Party Intervention & Leadership” or “How To Remain Union Free.” 3 Gregory D. Jordan, Attorney at Law and Full Professor of Business Law & Ethics at Union University in Jackson. Jordan was with Rainey, Kizer, Reviere & Bell for 28 years before accepting a full-time position with Union to teach. His topic was “Walking the Gangplank: Employee v Independent Contractor.” 4 Panel Discussion, “Ready for the Captain’s Table: Appearance in the Workplace.” (L-R) Amy West, SPHR, Director of HR & Affirmative Action at Jackson State Community College was the Panel Moderator.

Other members of the panel were Susan Morris, Owner of Express Employment Professionals; Donna Dickinson, PHR, HR Director at First South Bank; Debbie Harris, PHR, Director of Employee Relations & Engagement at West Tennessee Healthcare; and Bob Binkley, Attorney with Rainey, Kizer, Reviere & Bell. 5 Geoffrey Lindley and Latosha Dexter presented, “Navigating Through Rough Seas: FMLA Case Studies.” 6 John D. Burleson, attorney with Rainey Kizer, spoke on “Smooth Sailing for HR Compliance: Anchoring Best Practices in Leaves of Absence.” 7 Exhibitors Break at the 2012 Fall Employment Law Seminar 8 Ari Sauer, attorney with Siskind Susser Immigration Lawyers in Memphis, was an exhibitor at the Conference. Ari is also Chapter Chair of the American Immigration Lawyers Association (AILA) Mid South Chapter.

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Beyond the White House race, the other take-away from the 2012 election may be that the least popular Congress in human recorded history was reelected nearly in its entirety. The Center for Responsive Politics says spending on all federal elections during the 2012 cycle was a record $6 billion, and we will still have a Democratic White House, GOP House, and a Democratic Senate for at least the next two years.

While the good news for campaign-weary Americans is that Election 2012 is over, the ominous news is that the “fiscal cliff” lies dead ahead. Both the short- and long-term fates of the economy may be altered by what Congress prior to the new year.

The term fiscal cliff was first coined by Federal Reserve Chairman Ben Bernanke.

It refers to the combination of automatic tax increases and spending reductions that will occur on or around January 1, 2013 if Congress does nothing.

Cliff

Jumping

By Michael K. Layman

Election 2012 may be over, but the higher stakes for the economy may be how Washington deals with the “fiscal cliff” On a good night for Democrats, President Obama was re-elected on November 6 by winning 332 electoral votes to hold the White House in spite of 8 percent national unemployment, which hasn’t been done since FDR was in office.

The election seems to suggest that America loves incumbent presidents these days. With President Obama’s re-election, it marked the first time since the successive Jefferson, Madison and Monroe presidencies in the early 19th Century that the U.S. has elected three straight two-term presidents.

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Congress must address the Bush tax cuts, sequestration and the debt ceiling to keep America from metaphorically falling off the cliff. Failing to solve that perfect storm of converging issues may increase unemployment, slow economic growth and plunge an already wobbly economy back into an official recession. The Congressional Budget Office has estimated that 3.4 million jobs would be lost, and the unemployment rate would rise from the current 7.9 to 9.1 if we fall off the fiscal cliff.

So what is the fiscal cliff? And why would we fall off it? The fiscal cliff is composed of five elements: 1 & 2—Sequestration and spending caps: As a result of the August 2011 deal to raise the federal debt ceiling, Congress passed the Budget Control Act. That measure set future federal spending caps that went into effect at the beginning of federal budget year 2012.

Congress also established a “sequestration” mechanism to reduce the deficit over the next decade. Sequestration would be an across-the-board reduction of $1.2 trillion in largely discretionary government expenses over the next 10 years. Sequestration is scheduled to go into effect on January 1, 2013 and would automatically eliminate $54.7 billion from defense programs and $54.7 billion from non-defense programs in 2013. Thousands of federal contract jobs may be eliminated as a result of the seques-

tration spending cuts, and HR professionals across the country are already bracing for these reductions.

3—Expiration of Bush tax cuts: At present, the $180 billion annual George W. Bush tax cuts will end on January 1, 2013. If Congress fails to extend or reach a deal on taxes before year’s end, it will mean all of our wallets will be a few thousand dollars lighter. According to the Washington, D.C.-based Tax Foundation, individual taxpayers could pay anywhere from $1,310 (Mississippi residents) to $5,783 (Connecticut residents) in additional taxes per year if the federal income, dividend and capital gains rates revert to the higher Clintonera levels. President Obama has proposed letting the Bush tax cuts expire for married taxpayers making over $250,000, and single taxpayers making over $200,000. Republicans seek to extend the Bush tax cuts to all taxpayers.

SHRM is advocating for the extension of the Section 127 employerprovided education assistance credit, which is slated to expire. Section 127 of the Internal Revenue Code, which is now part of the Bush tax cuts, allows an employee to exclude from income up to $5,250 per year in educational assistance at the undergraduate and graduate level. SHRM is the co-chair of the Coalition to Preserve Employer Provided Educational Assistance, which is devoted to extending this employer-provided tuition assistance benefit. (For more info, go to www.cpepea.com).

4—Expiration of unemployment benefits: Also at the beginning of 2012, more than 2 million people will lose their jobless benefits at the end of the year unless lawmakers extend them. More than $50 billion may be taken out of the economy if the unemployment insurance benefits were allowed to lapse 5—Debt limit increase: The amount of debt that the federal government can accrue is set by law. At print, that debt was approximately $16.05 trillion, approaching the current statutory limit of $16.394 trillion. Thus, Congress and the President will need to raise the limit come late January or February, or else the government will have to default on some financial obligations. This issue has been a line in the sand for the two parties before; the debt ceiling fight that ultimately yielded the Budget Control Act in August 2011 nearly caused a government shutdown.

Not-so-Lame Duck?

The old Congress will have to deal with all these fiscal cliff issues prior to the new year. The “lame duck” session of Congress began on Tuesday, Nov. 13, and will continue until the new 113th Congress is sworn in on January 2. Due to the looming fiscal cliff issues, this could be the most exciting lame duck session of Congress in years.

on extending the Bush tax cuts for higher-income households. In this case, doing nothing is akin to failure. America would plunge off the fiscal cliff. If that happens, $500 billion will be taken out of the economy in 2013 alone.

• Do something small—Congress and the White House may reach compromises on some tax and spending issues. House Speaker John Boehner extended a post-election olive branch from House Republicans in calling on the president “to make good on a balanced approach” that would include spending cuts and address government entitlement programs. In addition, both parties are particularly eager to stop sequestration. President Obama stated at the Oct. 22 presidential debate that massive military spending cuts due to occur in the New Year through sequestration “will not happen.” His categorical statement caught stakeholders on all sides of the sequestration issue a bit by surprise, but both parties may try to find new revenues and additional cuts to stop sequestration job losses. The new Congress would be left to hammer out a compromise, and congressional Republicans may leverage the debt ceiling debate in January.

• Do something big—President Obama is likely to propose a tax reform bill for the lame duck session and discussed during the presidential campaign reaching a “grand bargain” with congress on the fiscal issues. Key components of a grand bargain would likely include tax and entitlement reform, an extension in some form of the Bush tax cuts and a specific plan to cut federal spending.

Speaker Boehner said on election night that “the American people have also made clear that there is no mandate for raising tax rates.”

It is possible that Congress may consider a bill that would include $2.50 in spending cuts for every $1 in revenue increase as part of a grand bargain.

• Put off everything—Perhaps the most likely scenario is still that Congress will “punt” all fiscal cliff issues into 2013. There are only a handful of legislative days in the lame duck session, and both Democrats and Republicans may quickly agree to push these weighty debates to the new year. Fiscal cliff issues will get rolled into tax reform, immigration reform and other major debates that are likely in 2013. President Obama has said he’ll do whatever it takes to work with Congress to get a bipartisan deficit and debt reduction deal done. “I’ll wash John Boehner’s car. I’ll walk Mitch McConnell’s dog,” Obama said on Oct. 26.

If Congress and the White House reach no agreement and the spending cuts and tax increases take effect, the economy will unquestionably be leveled with a half-trillion-dollar short-term hit. On the positive side, falling over the fiscal cliff would lead to the biggest singleyear drop in the annual deficit as a percentage of the economy since 1969. Long-term, that would be beneficial for the economy. But could we weather the short-term cost, including another likely recession?

There are really four possible outcomes for the fiscal cliff in the next few weeks. Congress and the White House will either: do nothing, do something small, do something big or put off everything.

• Do nothing—It is possible, however unlikely, that both parties will be so entrenched in their positions following a close election that Congress and the White House fail to reach even a temporary agreement. After all, both President Obama and House Republicans won their respective elections, and both have long differed

Michael K. Layman Manager, Labor and Employment Policy Society for Human Resource Management michael.layman@shrm.org www.shrm.org www.HRProfessionalsMagazine.com

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BULLETIN HR Professionals of Greater Memphis, Please join me in congratulating and welcoming the 2013 SHRM-Memphis Board of Directors (Officers): President, Jill Bridges, GPHR President-elect, Rolana Bourland, PHR Treasurer, Jason Callahan Secretary, Shahana Brown-Ledee VP of Membership, Pat Myers, SPHR VP of Programs, Vanessa Burns, SPHR VP of Hospitality, Nicole Veternik VP of Communications, Rachelle Hart, PHR The 2013 team is kicking the New Year off with a “State of the County” address by Mayor Luttrell. Register Now at SHRM-Memphis.org.

We also wish to say thank you to the 2012 Board of Directors for all of their hard work as volunteer leaders. You guys are awesome!

The SHRM-Memphis Board of Directors is proud to announce its strategic partnership with the Healthy Memphis Common Table with the community initiative, Million Calorie Reduction Match (MCRM). The MCRM goals are to: • Seek to address the obesity epidemic in our community by improving the nutrition habits and increasing physical activity of the citizens of the City of Memphis and Shelby County, Tennessee through policies that transform the food and physical activity environments in organizations and community venues.

• Change the health (i.e. obesity rate, rates of heart disease, diabetes, and hypertension) of the citizens of the Greater Memphis area by creating a culture of health through participation by organizations such as local municipalities, major employers, non-profits, churches and community organizations.

MCRM Project Description: • MCRM, a project of the Healthy Memphis Common Table (HMCT), seeks to improve environments to support healthy eating habits and increase physical activity.

• Initial MCRM participants are those with a readiness for improving the health of their employees/members, etc.

• HMCT can facilitate initial project planning support and provide technical resource sharing to support either in launching or strengthening the organization’s health improvement program.

• Memphis is one of 5 communities funded by the Robert Wood Johnson Foundation (RWJF). RWJF is the largest US philanthropic organization dedicated to improving the health and health care of all Americans.

SHRM-Memphis is committed to improving food nutrition at meetings and events through a healthy meeting/event policy. Other commitments organizations can make are to increase physical activity opportunities through a healthy physical activity policy and/or improve food nutrition in vending machines through a healthy vending policy. SHRM-Memphis is also committed to communicating the program to HR Professionals. With New Year’s resolutions right around the corner, this is the perfect time for your organizations to make a commitment.

There is more to learn and the resources are free! For more information contact Connie Binkowitz, Project Director, at connie.binkowitz@ healthymemphis.org or 901.800.5108 or Mary Jo Greil, Project Coordinator, at maryjo.greil@healthymemphis.org or 901.800.5115.

Please share with your workforce through a generous grant from Plough Foundation, Memphis Talent Dividend established the Graduate Memphis College Resource Center for adults who started college but did not finish. The Center is located on the first floor of the Benjamin L. Hooks Central Library at 3030 Poplar Ave., Memphis, TN 38111. The Center is staffed by professional advisors who will help adults with all the things needed to return to the classroom. To learn more call the Center at (901) 415-2774 or visit its website: www.graduatememphis.org.

Have a Wonderful Holiday Season!

Julieanna Walker, PHR 2012 SHRM-Memphis President 901-603-1423 www.HRProfessionalsMagazine.com

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SHRM

MEMPHIS

WHO’S who

SHRM-Memphis

WHO’S who?

Getting to know your Board

Every issue we spotlight Board members, chairpersons and prominent leaders in the HR and business community.

Mislisia Toy, PHR

Professional Development Chair SHRM-Memphis Mislisia Toy is the Professional Development Chair for SHRM-Memphis. She manages the activities of the professional development committee to provide seminars, workshops and other professional development opportunities for the chapter membership.

Mislisia has been in human resources for over 12 years. She is currently a Sr. HR Assistant with Cargill Corn Milling Division. Her responsibilities include workforce planning with exempt and non-exempt positions, performance management, employee benefits, affirmative action planning, new hire orientation and on-boarding, compensation and labor and employee relations.

Mislisia has a BS in Office Administration and Business Administration from Mississippi Valley State University and earned a MS in Human Resources Administration from Central Michigan University in 2007. She received her certification as a Professional in Human Resources in June 2008.

Mislisia is a national member of SHRM and has been a member of SHRM-Memphis since 2006.

For current, local salary, wage and benefits info: Go to SalarySurveyOnline.com When ordering, use Referral Code: 87-134 Sponsored by: The Tennessee SHRM State Council Inc. and The Tennessee Chamber of Commerce and Industry

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PeopleFirst Partnership Meeting On November 6th the PeopleFirst Partnership hosted a meeting at the Community Foundation Room on Union Ave to discuss and plan how Memphis and Shelby County can continue to attract and retain top talent. Community leaders from the following organizations attended. If you would like more information, please contact Dr. Barbara Prescott, Executive Director, at 901.507.4182.

Mpact Memphis New Memphis Institute (formerly Memphis Leadership Academy) Memphis Talent Dividend Mayor Luttrell’s Young Professionals Mayor Wharton’s Millennials and Urban Fellows Memphis Urban League Young Professional SHRM-Memphis Executive Roundtable

1 John Daniel, EVP Chief Human Resources Officer at First Horizon Corp, and 2012 Chair of SHRM-Memphis Executive Roundtable. 2 Dr. Barbara Prescott, Executive Director of People First, A Memphis Fast Forward Initiative. 3 Nancy Coffee, President and CEO, New Memphis Institute. 4 Traci Sampson with The Consilience Group was the facilitator at the PeopleFirst Partnership meeting on November 6. 5 Participants at PeopleFirst Partnership meeting work on an assignment.

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COURTS HAVE PAVED THE WAY

By Rusty Turner

T

for Mississippi Employers’ Use of Mandatory Arbitration Programs

The Mississippi Supreme Court was initially reluctant to adopt Congress’ longstanding belief that public policy favored the resolution of disputes through arbitration. By 1998, Mississippi finally embraced arbitration as a lawful means of resolving disputes. Since then, arbitration has provided Mississippi employers with an efficient, economic method for resolving employment disputes. Recent U.S. Supreme Court precedent has also provided employers with a basis for requiring employees to waive the right to join in a class/collective action and arbitrate those claims on an individual basis. As such, Mississippi employers now have more incentive than ever for adopting arbitration programs to resolve workplace claims.

LEGAL BASIS FOR ENFORCEMENT

Federal Law The Federal Arbitration Act (“FAA”) provides a broad federal law basis for arbitration programs covering employment disputes. Although the FAA does not provide a basis for the arbitration of claims brought by seamen, railroad workers or those transporting goods across state lines on a regular basis, it provides ample basis for compelling arbitration of all other employees’ claims, including those for hiring, promotion/ demotion, harassment, discharge, compensation and overtime.

Mississippi Law Mississippi law does not include a statutory basis for compelling arbitration of employment claims, but Mississippi common/judicial law provides such a right. However, Mississippi employers need not rely on state law to enforce its arbitration program unless they employ seamen, railroad workers or transportation employees who regularly cross state lines to deliver products because, as stated above, the FAA does not provide a federal basis for enforcing arbitration with those workers.

Although no published Mississippi decision has addressed whether our common law is sufficient to compel arbitration of disputes for those three groups of workers, judicial decisions from other states indicate that it is. Therefore, Mississippi employers should state in their arbitration programs that both state and federal law provide equal and alternative sources for requiring arbitration of covered claims.

MISSISSIPPI EMPLOYEES’ ABILITY TO AVOID ARBITRATION

Fraud and Absence of Consideration Fraud and absence of consideration are both potential basis for avoiding arbitration. Even though the “fraud” exception exists, there are virtually no reported decisions where Mississippi courts have invalidated an employer’s arbitration program based on fraud. Mississippi courts have likewise not required employers to provide employees with separate monetary consideration to compel arbitration, but they have instead adopted the majority rule that either an offer of at will 14

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employment or continued at will employment is sufficient consideration to enforce an arbitration agreement.

Unconscionability or Unfairness Mississippi courts also recognize “unconscionability” or unfairness as a basis to avoid arbitration, but they only do so under limited circumstances. There are two types of unconscionability that employees must rely upon to avoid arbitration: 1) procedural; and 2) substantive. Each type is explained below.

Procedural Unconscionability “Procedural” unconscionability concerns the fairness of the process leading up to the employee’s execution of the arbitration agreement, rather than the substantive terms defining the employee’s rights and remedies in arbitration. “Procedural” unconscionability depends on the employee’s ability to prove one of two facts: (1) he lacked knowledge of the arbitration provision; or 2) he did not voluntarily agree to arbitrate his claims.

Absence of Knowledge An employee can show that he did not know about the existence of an arbitration provision through facts like this: 1) the arbitration provision was inconspicuously placed/printed in such a way that he could not have seen or understood it; (2) the language describing the requirement for arbitration was vague, overly complex or a combination thereof, and he was incapable of understanding it; or (3) his employer gave him no time to read the arbitration provision and/ or refused to answer his questions about it. Although an employee’s absence of knowledge is rarely proven, it still exists for extreme cases when an employee could not have possibly known about the existence of arbitration. Mississippi courts have consistently rejected such arguments when the arbitration clause is plainly written, clearly marked and explained to employees before they accept employment or before the employer adopts such a plan.

Absence of Voluntariness An employee’s reliance on his absence of voluntariness is even more difficult to prove as Mississippi courts have consistently held that disparities in “bargaining power,” do not invalidate an arbitration provision.

Thus, even though applicants and/or employees may claim they had no choice but to sign the agreement in order to either become or remain employed, that claim should be insufficient to avoid arbitration.

Substantive Unconscionability Substantive unconscionability depends on the employee’s ability to prove that the arbitration clause unlawfully stripped him of a substantive right/remedy available under the applicable law.

Deprivation of Substantive Rights Mississippi courts have found the provisions listed below to be substantively unconscionable: 1) a limitation of liability provision capping damages at $50,000 for one party but leaving the other party’s recovery right unrestricted; 2) limitations on actual/punitive damages; 3) a cost shifting provision where the party opposing arbitration paid the other party’s costs for compelling it; 4) a shortened period for filing claims; and 5) a waiver of jury trial right for one party but not the other. The guiding principle here is that Mississippi employers must not include provisions in their arbitration plans that limit an employee’s right to recover all the remedies available to the employee under the applicable law or which give the employer some right that the employee does not also have.

Financial Incapacity When an employee claims substantive unconscionability based on his alleged inability to pay his portion of the filing/administrative fees set out in the agreement, he must offer “individualized evidence” of financial incapacity. The American Arbitration Association (“AAA”) is by far the most widely used administrator for claims covered by employment arbitration programs, and AAA administered plans cap the employee’s contribution towards AAA’s initial $1,100 filing fee at $175. Thus, employees will not be able to argue that this $175 payment renders their employer’s plan unconscionable due to financial incapacity.

Absence of Coverage for Employee’s Claims Mississippi courts construe all doubts about whether the employee’s claim is one that is covered by the employer’s program in favor of arbitration. This presumption of coverage is even more profound when the employer uses “broad” language providing that any employment claims “related to” or “connected with” the employment relationship are “covered claims” as those terms imply that the parties consent to resolve “all disputes” having any connection whatsoever to the employment relationship. It is not surprising that when employers have used “broad” language, Mississippi courts have almost always found the claim covered by the arbitration program.

NEW INCENTIVES FOR ADOPTING ARBITRATION PROGRAMS

As indicated above, Mississippi courts have taken favorable views about mandatory arbitration agreements such that there are now few legal impediments to adopting arbitration programs that eliminate the prospect of litigating employment claims in a hostile venue.

The question that many Mississippi employers must still evaluate is whether the benefits of having such a plan outweigh the costs of creating and using it to resolve workplace disputes. Both of those issues are discussed below.

Benefits of Arbitration Program As indicated by the “Introduction” Section supra, recent U.S. Supreme Court precedent has made it possible for Mississippi employers to require individualized arbitration of employees’ class/collective action claims. The Court has done so through decisions holding that if the statute under which the plaintiff sues does not explicitly preclude individual, non-class, arbitration, then courts must enforce such provisions as written. Thus, Mississippi employers may now enforce class/ collective action waivers through arbitration programs which means that they can also avoid the potentially crippling impact of having to litigate a class/collective action asserting overtime violations. Not surprisingly, the current NLRB has objected to such class/collective action waivers as

being violative of an employee’s right to engage in concerted, protected activity under the National Labor Relations Act. Federal courts in Georgia and Texas have already rejected the NLRB’s position, and the Fifth Circuit Court of Appeals (which presides over Mississippi) will decide this issue next Spring. Most believe that the Fifth Circuit will reject the NLRB’s untenable position based on existing precedent, and the Fifth Circuit’s decision will largely remove any remaining uncertainty for Mississippi employers concerning this issue.

In addition to avoiding the potentially crippling impact of wage and hour collective actions, employers having employment practices liability (“EPL”) insurance receive a premium decrease after adopting an arbitration program. Employers also save money on defense costs because jury trials are more expensive to litigate. Employers also have the same degree of control over selecting the arbitrator as does the employee, and they can usually select an impartial one with substantial experience in resolving the type of claim brought by the employee.

Likewise, the “settlement value” of claims subjected to arbitration are usually lower than those of jury trials because plaintiffs’ counsel subjectively perceive that they will recover less in arbitration. Although there is no empirical evidence suggesting that employers prevail more often in arbitration than court, it is highly unlikely that a seasoned arbitrator will be motivated by emotion or prejudice and award an employee a large, unsubstantiated verdict as do some “runaway juries.” Finally, arbitration remains a private proceeding and therefore does not generate the publicity that often surrounds a jury trial. For all these reasons, it is not surprising that AAA is presently administering nearly 3,300 employer sponsored arbitration programs nationally, and it has annually presided over at least 2,000 employment cases since 2009.

Costs and Risks of Arbitration Program The most substantial cost associated with employment arbitration is the employer’s duty to pay the arbitrator’s fees and expenses. Since AAA only authorizes experienced employment attorneys to preside over such cases, arbitrator fees typically average at least $300 per hour. Thus, if a typical case is fully litigated through the final award stage, an employer may pay $30,000 in arbitrator fees over the life of the case. Arbitrators are also less likely than judges to grant summary judgment motions since arbitrators generally allow claimants to put on their evidence before disposing of such claims through pretrial motions because arbitrators’ premature dismissal of claims is one of the few grounds for appealing an arbitrator’s decision.

CONCLUSION

Although the Mississippi Legislature evened the playing field for employers through tort reform ten years ago, Mississippi still has certain venues that retain the status of “judicial hellholes” where no employer wants to litigate. That fact, combined with the ability to avoid the exorbitant defense costs required in litigating a class/collective action should encourage every Mississippi employer to seriously consider adopting a comprehensive arbitration program for resolving employees’ claims. While the cost/benefit analysis for doing so was gray ten years ago, such is no longer true. Indeed, every prudent Mississippi employer should now evaluate arbitration as a truly viable alternative for resolving employment disputes.

Rusty Turner is Governmental Affairs Director for the SHRM Mississippi State Council. He is also an attorney with Balch & Bingham, LLP in Jackson. www.HRProfessionalsMagazine.com

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Slow Growth Since 2009 WorldatWork, the Total Rewards Association, reports pay increase budgets have increased from an all-time low in 2009 of 2.2 percent to 2.8 percent in 2012. Interestingly, the increase doesn’t seem to be due to companies awarding larger pay increases, but rather is the result of fewer companies reporting zero percent increases or frozen salary budgets.

According to Alison Avalos, CCP, research manager for WorldatWork, “When pay budget freezes spiked in 2009, overall mean and median salary budget increases plummeted, pulled down by the zero values. The overall average salary budget seems to be holding steady at close to 3 percent, but the growth is not because employers are being aggressive with salary increase budgets. It is mostly because the number of 0 percent responses has declined in the three years since the recession.”

The 2012 Memphis Area Pay Practices Survey included a question regarding the percentage of employees who actually received an increase in 2011, a question that has been included in the comprehensive wage survey in past years. The percentage of employees receiving increases has steadily gone up since 2009, consistent with WorldatWork’s findings that fewer companies nationally are freezing salaries.

$ALARIES:

What to Expect in 2013

By Jennifer Blake

We’ve all heard the truism “a watched pot never boils”, but we know if we’re patient, water will eventually boil. Monitoring the salary market since 2009 has been somewhat like waiting for the pot to boil.

In a world where rapid change is the norm, HR professionals might feel discombobulated by the lack of change in the market. Shouldn’t we be doing something? Are we going to wake up one day to a mass exit of employees because our salaries aren’t competitive?

By most accounts, overall wages in the U.S. (Memphis included) have grown, but very SLOWLY, much like other segments of our lethargic economy, and salary increase projections for 2013 are about the same. Likewise, employers’ salary structures have inched upward slightly, even though actual salaries may have been frozen.

One of the most proactive things we can do as HR professionals, in all circumstances, is to arm ourselves with the facts. The information contained in this article is taken from several sources including the 2012 Memphis Area Pay Practices Survey, which was conducted by The Centre Group, in partnership with the Mid-South Compensation Association (MSCA), during the spring of this year. Fifty-five Memphis-area companies representing around 65,000 employees participated in the survey.

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% of Employees Receiving Raises

2011 96%

2010 88%

2009 85%

Projections for 2013 Based on results of multiple employer surveys conducted by different consulting firms there isn’t much variation regarding companies’ 2013 salary budget planning.

2013 Average Projected Source Median Base Salary Increase Empsight International LLC 3% Hay Group 3% Mercer’s 2012/2013 U.S. Compensation Planning Survey 2.9% Towers Watson Data Services Salary Budget 2.9% WorldatWork 2012-2013 Salary Budget Survey 3% Memphis-area employers projected an average merit increase of 2.7% for 2013, somewhat below the national averages, but still in the same ballpark.

Hay Group took their data one step further by calculating the estimated net gain in employee

pay. With anticipated consumer price growth of 2.2 percent, U.S. workers should see a net gain in their salaries of 0.8 percent – better than the average 0.6 percent net loss experienced this year.

need to find out before you design your communication plan. If you do nothing else, at least walk around the cafeteria and ask people!

Additionally, Hay Group reported projected 2013 pay increases by industry.

In the industrial sector, which includes manufacturing, planned increases are at or above 3 percent. The retail industry expects salary budgets to increase by 2.9 percent across all job categories.

An interesting resource that measures employees’ expectations nationally is the Glassdoor® quarterly Employment Confidence Survey, conducted online

by Harris Interactive. Among other indicators, the survey monitors employee expectations regarding salaries. In the Q3 2012 Employment Confidence Survey employee expectations for pay or cost-of-living increases in the next 12 months were down slightly from the previous two quarters.

Hospitals are a different story where salary budget increases will likely be well below 3 percent. According to Hay Group’s research, the average planned increase for nursing salaries is 2.4 percent. Furthermore, salary structures for nurses and support staff is expected to decrease by one-half of one percentage point in 2013 compared to 2012.

Expect Pay or COLA in Next 12 Months?

Q1 Q2 Q3

Yes 43% 40% 39%

No 38% 37% 41%

“Over the past several years, wage growth in health care has been strong,” said C.J. Bolster, a Hay Group vice president and national director of U.S. industries. “This could just be things getting back to the norm. Also, as health care reform truly begins to take effect in 2014, 2015 and 2016, it will impact the operating margins of hospitals. It’s uncertain how it will all play out, but hospital CEOs are very sensitive to long-term costs right now.”

The survey further reports results for men, women, and younger workers (18-34 years old). For the third quarter of 2012, younger workers were the most optimistic with 44 percent expecting pay raises in the next quarter.

Men were close behind with 43 percent expecting a raise compared to 34 percent of women.

Increases by Industry

Employee Expectations One of the most critical elements in managing compensation is communicating pay decisions, and probably the most important element in planning your communication is to know where your employees are coming from.

How many times have you felt really good about your company’s compensation strategy only to be surprised by employees’ negative feedback?

If you’ve been in the working world more than a decade or so, you would probably agree that dramatic, and often unpredictable, change is now the “norm”. HR professionals are not immune to the impact constant change has on our working (and personal) lives. But one thing has always been and still is true: To manage compensation effectively you need good data and ongoing vigilance with respect to your pay ranges and employee pay.

Expectations that go unmet create disappointment, which generates negativity and possibly even skepticism. How you find out what your employees are expecting in terms of upcoming salary adjustments will depend on your organization’s communication style and culture. But you

Jennifer Blake, Consultant The Centre Group jblake@thecentregroup.com www.thecentregroup.com

Burch, Porter & Johnson PLLC

Labor and Employment Law Group  ExcELLEncE. EfficiEncy. REsuLts.

(L to R): Attorneys Jef Feibelman, Lisa Krupicka, Tannera Gibson, Jennifer Hagerman, Mary Hamm, Melissa Maravich, & Mary Morris 130 North Court Avenue | Memphis, TN 38103 | 901/524-5000 | www.bpjlaw.com

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N L R B

The NLRB’s Position on Employment At-Will Policies:

What Every Employer Should Know

By Craig A. Cowart

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here is a good chance your company’s employee handbook contains an employment at-will policy. Maybe the policy has been in place so long you flip right over it when working with other sections of your handbook. However, the NLRB has entered the picture when it comes to employment at-will policies, and it is time to look at your at-will policy with a fresh set of eyes.

Employment At-Will Policies and You If your company is not unionized, it is likely the vast majority of employees at the company are employed on an at-will basis. In a simplified “nutshell,” employment at-will means the employee is free to resign at any time, and the employer can discharge the employee at any time for any reason or no reason (so long, of course, as the discharge is not for an illegal reason).

Employment at-will arrangements provide flexibility, and most employers prefer such relationships to employment contracts for a specified duration. As a result, it is very common for employers to have employment at-will policies that are reiterated in employee handbooks.

The NLRB Enters the Employment At-Will Picture Everyone knows the National Labor Relations Board (“NLRB”) deals with unions and collective bargaining agreements. So, what does the NLRB have to do with employment at-will policies? What does the NLRB have to do with policies for non-union workforces?

The NLRB administers the National Labor Relations Act (“the Act”).

Section 7 of the Act provides that employees have “the right to selforganization, to form, join, or assist labor organizations …and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection…” This portion of the Act applies to both union and non-union workforces. So, even if your company is not unionized, the Section 7 right to engage in

concerted activities for the purpose of mutual aid or protection applies to company employees.

American Red Cross Arizona Blood Services Region In a case decided by an NLRB Administrative Law Judge in February 2012 (American Red Cross Arizona Blood Services Region), the NLRB took the position that the following handbook policy acknowledgment language violated employees’ Section 7 rights:

“ I further agree that the at-will employment relationship cannot be amended, modified or altered in any way.”

Specifically, the NLRB took the position that the language was essentially an agreement by employees that their at-will status could not change. The NLRB contended that employees were effectively waiving their right, whether represented by a union or not, to engage in concerted activity to change their at-will status.

Although noting the above language “does not mention union or protected concerted activity, or even the raising of complaints involving employees’ wages, hours and working conditions,” the Administrative Law Judge nonetheless found the quoted provision unlawful. The Administrative Law Judge found that “there is no doubt that employees would reasonably construe the language to prohibit Section 7 activity.” Simply put, the Administrative Law Judge found the provision unlawful because he believed it purported to prevent employees from seeking to change their at-will relationship under any circumstances, including through protected, concerted activity.

American Red Cross settled after the ruling from the Administrative Law Judge, and the full Board did not rule on the case. Nevertheless, because many employers have handbook acknowledgements containing similar at-will language, there was cause for concern. www.HRProfessionalsMagazine.com

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Hyatt Hotels Corporation Also in February 2012, the NLRB issued a complaint against Hyatt Hotels Corporation alleging that the following handbook provision was unlawful:

into any agreement contrary to the foregoing ‘employment at-will’ relationship. Nothing contained in this handbook creates an express or implied contract of employment.”

“ I acknowledge that no oral or written statements or representations regarding my employment can alter my at-will employment status, except for a written statement signed by me and either Hyatt’s Executive Vice-President/ Chief Operating Officer or Hyatt’s President.”

Applying similar reasoning as in Rocha Transportation, the NLRB Acting General Counsel noted “the provision does not require employees to refrain from seeking to change their at-will status or to agree that their at-will status cannot be changed in any way.

Instead the provision simply highlights the Employer’s policy that its own representatives are not authorized to modify an employee’s at-will status.”

The Hyatt Hotels Corporation case settled soon after the NLRB issued the complaint. The case was never even considered by an Administrative Law Judge, and the issue of the NLRB’s exact position on employment at-will provisions remained very unclear for employers.

The NLRB Provides Some Clarification On October 31, 2012, the Acting General Counsel of the NLRB issued two advice memoranda that provide some guidance for employers in reviewing employment at-will policies. In his Advice Memorandum addressing employment at-will language in Rocha Transportation, the Acting General Counsel upheld the following policy:

“ Employment with Rocha Transportation is employment at-will. Employment at-will may be terminated with or without cause and with or without notice at any time by the employee or the Company. Nothing in this Handbook or in any document or statement shall limit the right to terminate employment at-will. No manager, supervisor,or employee of Rocha Transportation has any authority to enter into an agreement for employment for any specified period of time or to make an agreement for employment other than at-will. Only the president of the Company has the authority to make any such agreement and then only in writing.”

In holding the policy lawful, the NLRB Acting General Counsel stated “the provision does not require employees to refrain from seeking to change their at-will status or to agree that their at-will status cannot be changed in any way… Instead, the provision simply prohibits the Employer’s own representatives from entering into employment agreements that provide for other than at-will employment.”

So What Do I Do Now? The October 31 Advice Memoranda from the NLRB suggest that, at least for now, the NLRB is willing to take a measured approach when it comes to evaluating at-will disclaimers. Under the reasoning of the Advice Memoranda, policies that preclude modification of the at-will status except in writing by certain company official(s) would seem to remain valid. On the other hand, policies, like the one quoted above from American Red Cross, that purport to prohibit any change to the at-will relationship under any circumstances are likely still a target of the NLRB. While the Advice Memorandum in Mimi’s Café suggests that language stating that no representative of the Company has authority to enter into any agreement contrary to the at-will employment relationship is permissible, proceed with caution. The Advice Memorandum in Mimi’s Café relies heavily on context. In that case, the surrounding provisions made clear that the disclaimer was confined to the specific handbook rather than to any future documents. Presumably, the NLRB Acting General Counsel reasoned that it would have been unreasonable for employees to believe the language precluded them from altering their at-will status in the future. For now, the safer approach is to include language allowing, at least implicitly, for the modification of at-will status in the future, even if only by written approval from designated company official(s).

Both Advice Memoranda make clear that the law in this area remains unsettled. The NLRB views each case on the basis of the particular facts presented. Very few legal principles will apply in every circumstance.

So, what should you do? You should have your at-will policy and handbook acknowledgement language reviewed with a fresh set of eyes. Ensure they are consistent with recent NLRB developments.

And while you are at it, review your handbook and policies to ensure consistency in other areas of recent focus by the NLRB, including the treatment of confidentiality provisions, off-duty access rules, and social media policies.

Similarly, the following at-will language was upheld in Mimi’s Café:

“ T he relationship between you and Mimi’s Café is referred to as ‘employment at-will.’ This means that your employment can be terminated at any time for any reason, with or without notice, by you or the Company. No representative of the Company has the authority to enter 20

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Craig A. Cowart Partner, Fisher & Phillips, LLP ccowart@laborlawyers.com www.laborlawyers.com

LE AD ER

Breakfast Club

SH

Lipscomb & Pitts

IP

“F rom Homeless to the NFL…Sharing the Power of Cheerful Giving with Sean Tuohy ”

T

Photography by Donny Granger, Creation Studios

he Tuohy family was driving past Briercrest School on the eve of Thanksgiving, when they spotted Michael Oher, the new kid in school with Collins Tuohy (daughter). Oher was walking from the bus stop to the school, which was closed for the holiday.

Leigh Anne Tuohy simply said “turn around” to her husband, Sean. Those two words and the act that followed changed the family’s life forever. There was not a master plan, just two simple words that sparked a journey of giving that led to the Tuohy family’s adoption of Michael Oher, who went on to play football in high school, college and now in the NFL as an offensive tackle for the Baltimore Ravens. The family’s story was portrayed in the popular film, The Blind Side, starring Tim McGraw as Sean and Sandra Bullock as Leigh Anne Tuohy.

Sean Tuohy, the guest speaker at the November 16th Signature Breakfast with Lipscomb Pitts Breakfast Club, told the story of how his family came to know, and eventually adopt, Oher. His message was simple and begged that we all be cheerful givers, and that small acts can make a big difference. “If the most obvious success story walking the streets of Memphis can fall through the cracks, imagine who gets left behind,” Tuohy stated. “Every city has a Michael Oher…every city has thousands of Michael Ohers…it’s worth saving them.”

He told a story of a man and his grandson, walking down the beach among thousands of starfish that washed up on the shore. The boy was throwing the starfish back in to the ocean because he knew they would not survive out of the water. The man asked the boy “Son what are you doing?” The boy replied, “I’m saving the starfish.” The man told the boy to look up and down the beach at all of the starfish and said “What are you doing? You can’t save all of these!” The boy picked up another starfish and threw it as far in to the water as he could, and said “I saved that one.” The moral is that we may not be able to save all of the starfish, but it is worth it to save just one.

We all get in to the giving spirit during this time of year. The holiday season is flooded with acts of kindness, a giving spirit, and the gathering of families. Sean said his family was blessed with that feeling year round once Michael became a part of their lives.

“If by chance you are lucky enough to have the opportunity to make a difference in someone’s life. Then folks, you’ll have that holiday feeling for the rest of your life!”

We can take a simple lesson from the Tuohy family and challenge ourselves, our families and friends to make a deliberate effort to be cheerful givers not just this holiday season, but year-round. www.HRProfessionalsMagazine.com

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Performance Management Process?

Is the HR Team Leading Your

By Voss W. Graham

Do you ever get this type of question – What is a Performance Management Process? It is a troubling question especially from executives or human resource leaders. The reason it is troubling is due to the fact Performance Management has everything to do with your people.

People are an Asset of the organization. And, more important can increase in value faster than other assets maintained by the organization. When there is purposeful action to growth or improving the talent of your people, you have entered the world of Performance Management.

There are numerous studies, definitions and official papers on what factors to embrace in having a Performance Management Process – yet, in simple terms it is all about your people and improvement.

Progressive companies take an active lead in the development and improvement of their people.

The results of their efforts are reflected in higher levels of employee engagement, cultures aligned with high performance, improved business returns and higher customer (and employee) satisfaction ratings. Are you a member of the Progressive company group?

Performance Management includes elements of planning, measuring, reviewing results, coaching performance, feedback session (performance evaluations and reviews) as well as objectives, expectations, standards of performance and measurement tools. Yet, one of the most important elements comes directly from the Human Resources group. The Hiring and Selection of potential High Performers and their respective “On-Boarding” process.

Whether you call it an “on-boarding system,” an orientation program or a Fast Start system, it may mean the difference in having a high performer or average performer. It is a key system for creating a high performance culture based upon setting the standards at higher levels.

So what is this on-boarding system all about and how does it relate to Performance Management?

In simple terms it is a process that gets a new employee in a job started with a clear focus on the outcomes of the job. It helps to get someone in a new position to get started quickly and get productive at a faster rate.

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Four Critical Elements for Performance Management “On-Boarding”

There are several key items for an on-boarding system to work and here are the Critical Four.

1. Key Accountabilities for the Job – include the key outcomes that are expected from this job function. This is not to be confused with a Job Description. Most, not all, Job Descriptions are nothing more than an activity list for a job with no mention of actual outcomes and results expected.

2. A Prioritized Listing of Key Traits for the Job to be Successful – Key Traits identified for the Job to be successful show the person just what is needed to be a success. These traits should be closely matched to the new hire with few exceptions (if you want to top grade your company and staff.) The closer the true match, the higher the level of natural performance from the individual in the position or job.

It is a true win-win for both the company and the employee. Also, mismatches between the job traits and the individual’s traits reflects a clear path for an individualized personal development process.

3. A Manager Who Understands the Need for a Fast Start in a New Position – The major mistake by most managers in this situation is to be unprepared for the start up or to take a lazy attitude about ramping up the responsibilities of the new hire. I have seen terrible situations regarding new hires whereby the manager had no place assigned for a new employee. Placed the person in the company lunchroom and forgot about him! Two weeks later the manager was amazed when informed that the new potential superstar had quit. – You can’t make this stuff up! It’s true. New hires, especially potential high performers need to launch quickly and take on critical projects as soon as possible. Remember, high performers are looking for new challenges rather than hiding from them.

4. A Mentor, Peer or Coach Assigned to the New Person.

A critical accelerator for performance of the new hire is to assist them with the inner workings of the organization, share who the real players are, what politics are in play, and what are the procedures that need to be followed to get things done quickly and effectively. An organized mentor process will increase the effectiveness of a new hire by a factor of five, due to less trial and error and more focus on getting results.

The Human Resources Leaders should be the catalyst for an effective “on-boarding” process to ensure the high performance culture has the opportunity to grow. While the “on-boarding” process is only a part of a Performance Management Process, it is the key for getting the results you require for a high performance culture to blossom.

Contact me to receive a white paper on “Employer Branding” and learn how HR Teams can make a difference for your organization.

Voss W. Graham Sr. Business Advisor / CEO InnerActive Consulting Group, Inc. voss@inneractiveconsulting.com www.inneractiveconsulting.com

Using SOCIAL MEDIA EVIDENCE in Termination Decisions:

A New Illustrative FMLA CASE from the Sixth Circuit

by J. Gregory Grisham

Employers are struggling to understand legislation, judicial decisions and agency rulings which limit and regulate access to employee social media activities. California, Illinois and Maryland, recently restricted the employer’s ability to request the username or password to employee and applicant social media accounts. Fourteen other states introduced similar legislation in 2012. While employees’ use of social media continues to challenge employers, recent decisions have supported the employers’ reliance on Facebook pictures to discharge employees for violation of company policy.

In one recent case, the Sixth Circuit Court of Appeals ruled that a company neither retaliated against an employee who had taken intermittent leave nor interfered with her rights under the Family Medical Leave Act when firing the employee for fraud following an investigation that included an examination of Facebook pictures posted by the plaintiff. Jaszczyszyn v. Advantage Health Physician Network, 2012 U.S. App. LEXIS 23162 (6th Cir. Nov. 7, 2012) (unpublished). The Jaszczyzyn case may be instructive to employers. The decision considers in the FMLA context the impact of social media evidence on the employer’s decision to terminate an employee while analyzing the differences between interference and retaliation claims. It also addresses the application of the “honest belief rule” to both types of FMLA claims.

Background After she was cleared to work without restrictions following a health examination, the plaintiff, Sara Jaszczyszyn, began working for Advantage Health Physician Network in January, 2008 as a part-time clerical employee. She had reported a prior back injury related to a car accident years earlier, which required two surgeries, but stated she had not experienced recent back problems. She later was promoted to a full-time position in the Human Resources Department, and then was transferred to work as a customer service representative.

Nine months after the transfer, the plaintiff complained to her treating physician of worsening back pain. Her doctor submitted a work release form to the company, stating the plaintiff was “completely incapacitated” for an eight-day period (August 31 to September 7, 2009). The company advised the plaintiff to apply for FMLA leave and provided her the necessary paperwork, including the rules governing leave.

The plaintiff returned to work on September 8. The following day, her physician submitted an incomplete Certification of Health Care Provider

form to the company, indicating the plaintiff was having four “flare ups” per month and would be unable to perform all of her job duties when the flare ups occurred. Her employer approved the request for intermittent FMLA leave. The plaintiff, thereafter, began treating the leave as continuous rather than intermittent. She had to be reminded repeatedly to contact her supervisor if she was unable to come to work and to turn in the required paperwork.

After seeing the plaintiff on September 22, the plaintiff’s physician completed an additional Certification, projecting the plaintiff would be disabled from September 10 to October 5. The physician later completed and signed a work release form indicating the plaintiff was completely incapacitated for an additional three weeks (October 5 to October 26).

The Facebook Pictures On Saturday October 3, the plaintiff spent eight hours attending Pulaski Days, a local Polish heritage festival with friends. She later posted nine pictures on Facebook taken at the festival of her engaging in a variety www.HRProfessionalsMagazine.com

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of activities. Thereafter, the plaintiff stated in voicemail messages to her supervisor that she would not be at work on Monday (October 5) because she was in pain. The supervisor and several of the plaintiff’s co-workers were plaintiff’s “friends” on Facebook. One co-worker pointed out the festival pictures on Facebook to the plaintiff’s supervisor. The plaintiff’s supervisor then notified her own supervisor, sharing some of the photos. After consulting with counsel, an investigation was conducted by the company that included an interview with the plaintiff. The majority of the interview focused on the Facebook pictures of the plaintiff at the festival which the employer considered inconsistent with the statements that she made in support of FMLA leave. She was unable to give a reasonable explanation for the discrepancy between her request for leave and her conduct at the festival. The decision was made to terminate plaintiff’s employment for fraud.

The plaintiff sued the employer, asserting two claims: FMLA interference and FMLA retaliation. The trial court granted the employer’s request for summary judgment, agreeing that there was no evidence that anyone at the company had a retaliatory motive and that the employer had an “honest suspicion” the plaintiff was abusing her leave. The plaintiff appealed.

FMLA Retaliation/Interference Standards Under the FMLA, eligible employees are entitled to a total of 12 weeks of leave during any 12-month period for, among other things, the employee’s own “serious health condition that makes the employee unable to perform the functions” of his or her job. See 29 U.S.C. §2612(a)(1)(D). Furthermore, for violations of the FMLA, the law provides employees with two theories of recovery: interference and retaliation (based on 29 U.S.C. §2615(a)(1) and §2615(a)(2), respectively.

First, the appeals court determined that of the elements required to state a prima facie claim under both theories of recovery, only the last two prongs of each were at issue: for the interference claim, “[whether] the defendant denied [her] FMLA benefits or interfered with FMLA rights to which [s]he was entitled,” and for the retaliation claim, “[whether] there was a causal connection between the protected FMLA activity and the adverse employment action.”

The employer’s intent to discriminate is required proof under a claim of retaliation , but not under an interference theory. The Court also rejected a strict liability standard for interference cases, stating, “[I]nterference with an employee’s FMLA rights does not constitute a violation if the employer has a legitimate reason unrelated to the exercise of FMLA rights for engaging in the challenged conduct.” Edgar v. JAC Prods., Inc., 443 F. 3d 501, 507-08 (6th Cir. 2006).

Next, the appeals court determined that FMLA interference claims were properly analyzed under the McDonnell Douglas burden-shifting test, at least where, as in this case, the employer had proffered a “legitimate reason unrelated to the exercise of FMLA rights for terminating the employee.”

Application of “Honest Belief” Rule The Court of Appeals next considered whether an employer’s “honest belief” in the justification for its action can defeat an FMLA interference claim. The Court stated, “[S]o long as the employer honestly believed in the proffered [lawful] reason given for its employment action, the employee cannot establish pretext even if the employer’s reason is ultimately found to be mistaken, foolish, trivial, or baseless.” Courts apply the “honest belief” rule in considering whether a plaintiff has met 24

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her burden of establishing that the reason proffered by the employer for the adverse employment action is pretextual. The Court found it was unclear under Sixth Circuit precedent whether the “honest belief” rule applied to interference claims. However, the Court found it unnecessary to resolve the issue, since it concluded the plaintiff had received all of the leave she was entitled to receive at the time the investigation into her conduct began, and therefore, could not state a claim for Interference with FMLA rights. The Court found the employer had not ruled on the plaintiff’s second leave request when she was terminated. The Court further noted the plaintiff’s interference claim related only to the employer’s failure to reinstate her at the end of her FMLA leave. The employer had approved the first leave request and paid her for the leave time. The Court found the plaintiff did not return to work at the end of her leave because, she claimed, she was too sick to return, not because of a denial of reinstatement.

Accordingly, the Sixth Circuit concluded the plaintiff had failed to state a claim for interference.

The Court then applied the “honest belief” rule and rejected the plaintiff’s retaliation claim. It found the employer’s proffered reason for the termination decision was not pretextual. The employer had an “honest belief” that plaintiff had engaged in FMLA fraud, a non-retaliatory reason for discharge. The Court noted the employer’s investigation was adequate, turning in large part on the plaintiff’s behavior at the investigative interview.

The Court rejected the plaintiff’s assertion that the termination notice filled out by her supervisor (which stated absenteeism as the basis for termination) should be regarded as direct evidence. The Court stated the supervisor was not responsible for the termination decision and “absenteeism” was an accurate characterization of the plaintiff’s behavior.

Conclusion As can be seen in the Jaszczyszy decision, Courts will uphold an employer’s decision to discharge an employee for fraudulent use of FMLA leave. The decision underscores the importance of employers having written rules of conduct and conducting a thorough investigation before making the decision to discharge an employee for misconduct.

The honest belief rule can be a powerful tool for employers to use to support termination decisions following an investigation over workplace misconduct. When the employer’s conduct is challenged, courts focus on whether the employer made a reasonably informed and considered decision before taking an adverse employment action. Here, the employer reviewed the Facebook pictures posted by the plaintiff, her prior statements made in support of leave and interviewed plaintiff prior to making the decision to terminate her employment. Notably, the Facebook pictures were not surreptitiously obtained by the employer. Rather, the plaintiff had earlier “friended” her supervisor and co-workers which made her Facebook postings and pictures open for viewing. Deceptive or covert use of Facebook by the employer may have been treated differently by the court. Finally, as use of social media grows among employees, employers must continually review their social media policies in light of legislative developments, court and agency decisions.

J. Gregory Grisham Attorney, Jackson Lewis, LLP gregory.grisham@jacksonlewis.com

BIG

The business of

Fraudulent Degrees

By Lisa P. May

Little white lies… Stretching the truth… Innocent exaggerations…

Well, those are not the kind of lies we are going to be talking about today.

Today’s topic is a big, bold-faced whopper: diploma fraud. And fake degrees are more prevalent, easier to obtain, and more difficult to detect than you think.

What is diploma fraud?

In short, diploma fraud occurs when a person decides to buy ‘proof ’ that they obtained a degree from a college or university. The person may have gone to the institution but just not finished, or he may have never enrolled in a class.

Either way, degrees and transcripts can be easily obtained for a price.

- Public embarrassment: Everyone has seen the news of a high ranking executive being exposed for faking his degree. Publicly uncovering an employee who lied about his credentials is extremely detrimental to a company’s reputation, and sometimes it takes years to recover.

- Dishonesty: Let’s face it, if a person will lie about their education, what is stopping them from committing other fraudulent (stealing money, trade secrets, etc) acts once they are hired?

What companies can do to protect themselves?

Be aware of the situation. Knowing that fake degrees are floating around out there is the first step.

Look at any claim of education with a critical eye. Examine dates the degree was allegedly acquired, and compare them with dates of employment, address information, and so forth. Follow up on any discrepancies Perform an Education Verification. If the open position requires a degree, take the extra time to have a professional background screening company verify the education. A reputable background screener will be able to solidly verify the school is in existence and accredited, the classes and dates the applicant attended, and whether or not they received a degree.

It is imperative to put measures in place to minimize the risk of hiring a person who is unqualified for a position. The issue of job seekers faking their degrees is not going away anytime soon.

Don’t fall victim to this scam!

Lisa P. May, VP of Marketing and Research at Data Facts

A simple web search will turn up multiple websites that provide degree fakery. A person simply enters his name, information, the degree they desire, and Presto! a few weeks later a degree shows up in the mail. These diplomas look authentic, but are completely fraudulent. In addition, some of these websites sell entire transcripts, complete with classes and grades!

Diploma fraud is BIG business. While no concrete figures are available, it is estimated that the companies behind these practices rake in 1 billion per year! George Gollin, a board member of the U.S.-based Council for Higher Education Accreditation, told CNN he estimates that more than 100,000 fake degrees are sold each year in the U.S. alone (source: www. diplomafraud.com).

Why would a person do it?

They are desperate. In the current economic climate, job seekers are vigorously competing with one another for any open position. This may tempt a person without a degree to employ unsavory tactics to get a leg up on the competition.

It is easy. Shelling out several hundred dollars for a ‘degree’ is easier and much less time consuming than spending thousands of dollars and several years getting an actual degree.

The consequences of hiring someone with a fake degree can be dire to a company’s wellbeing.

- Missing skills: The person may not have the skills that would have been obtained within the coursework of an actual degree. Having someone on staff who doesn’t know what they are doing can cost a company big-time. www.HRProfessionalsMagazine.com

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A A D

Psychological Counseling as Medical Examination:

Requiring Employees to Seek Counseling May Constitute a Medical Examination Under the ADA Employers Should Proceed Cautiously Before Conditioning Continued Employment on a Directive to Obtain Counseling, Therapy or Other Types of Treatment

By Lisa Lichterman Leach and R. Alex Boals

Since Congress passed the Americans with Disabilities Act (ADA) over 20 years ago, employers have learned to be cautious in requiring medical examinations of applicants and employees.

Typically, employers are focused, as they should be, on whether the examination in question is job-related and consistent with business necessity. However, even a cautious employer may find itself facing an unexpected discrimination claim if it fails to recognize that requiring an employee to undertake a course of treatment may constitute a prohibited “medical examination” under the ADA. This was exactly the case in Kroll v. White Lake Ambulance Authority, 691 F.3d 809 (6th Cir. 2012), in which the employer required the plaintiff to undergo counseling because of concerns over the employee’s erratic behavior at work. The plaintiff refused to attend the counseling, and her employment was terminated. In her subsequent lawsuit, the U.S. Court of Appeals for the Sixth Circuit found that requiring the plaintiff to obtain counseling amounted to requiring her to undergo a prohibited medical examination. The Kroll decision reminds employers to proceed cautiously before requiring employees to submit to counseling, therapy or other forms of treatment as a condition of continued employment.

Factual Background The plaintiff, an emergency medical technician for the White Lake Ambulance Authority, was considered a good employee. After plaintiff became romantically involved with another employee and exhibited some erratic behavior, several co-workers raised concerns with management about her well-being. In response, the office manager requested that the plaintiff obtain counseling. The parties disputed whether plaintiff was receptive to this initial request.

A few days later, in response to a dispute involving plaintiff and a co-worker, the director of the company held a meeting with plaintiff. At the meeting, the director addressed a complaint he received that plaintiff had screamed at a male acquaintance on the phone while driving a patient in an ambulance with emergency lights and sirens engaged. The director then advised plaintiff that her continued employment was conditioned upon obtaining counseling. The plaintiff refused to attend counseling, left the meeting, and never returned to work.

The plaintiff subsequently sued her employer, claiming in part that it violated the ADA by requiring her to submit to a prohibited medical examination in the form of counseling. The district court held for the employer, finding that requiring counseling was not a “medical examination” as defined in the ADA, and plaintiff appealed.

The Sixth Circuit’s Decision In reversing the district court, the Sixth Circuit deferred to the Equal Employment Opportunity Commission’s Enforcement Guidance concerning disability-related inquiries and medical examinations under the ADA (EEOC Guidance). The EEOC Guidance makes clear that psychological tests aimed at measuring certain personality traits, such as honesty, preferences, and habits, are not “medical examinations.” By contrast, psychological tests designed to diagnose mental health disorders, such as depression, are considered “medical examinations.” To assist in making this distinction, the EEOC Guidance provides a seven-factor test: www.HRProfessionalsMagazine.com

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1 whether the test is administered by a health care professional;

2 whether the test is interpreted by a health care professional;

the test is designed to reveal an impairment or 3 whether physical or mental health;

4 whether the test is invasive;

the test measures an employee's performance of a task 5 whether or measure of his or her psychological responses to performing

the task;

6

7

whether the test normally is given in a medical setting; and whether medical equipment is used.

Significantly, when weighing these factors, the employer’s intent is not determinative. If, for instance, an employer only wants to determine an employee’s tastes or habits, but has the employee undergo a psychological test that also can be used to diagnose mental illness, the test will be considered a “medical examination.”

Bearing these factors in mind, the Sixth Circuit considered whether the psychological counseling required of plaintiff was “likely to elicit information about a disability, providing a basis for discriminatory treatment." The court found that it did, analogizing to the Seventh Circuit’s decision in Karraker v. Rent-A-Center, Inc., 411 F.3d 831 (7th Cir. 2005). In Karraker, the Seventh Circuit considered whether the Minnesota Multiphasic Personality Inventory (MMPI) constitutes a “medical examination” under the ADA. The employer in Karraker claimed to be administering the MMPI to measure personality traits rather than identify psychological disorders. The employer noted that the test was not being scored by a psychologist and was evaluated using a vocational scoring protocol rather than a clinical protocol.

The Seventh Circuit found that the employer’s intent did not change the fact that the MMPI still could be used to diagnose disorders such as paranoid personality disorder. Accordingly, the Seventh Circuit held that the MMPI constitutes a “medical examination.”

In Kroll, the Sixth Circuit found that the required psychological counseling also constitutes a “medical examination.” The court acknowledged that the “exact substance” of the counseling was in dispute: the plaintiff claimed she was required to “receive psychological counseling” and “to see a mental health counselor as a condition to keeping her employment,” while the employer argued that the counseling was not necessarily psychological. In support of her position, the plaintiff pointed to testimony from a manager who conceded that “it would be fair to say” that plaintiff was asked to “see a psychologist to discuss issues related to her mental health.”

Based on this evidence, and in light of the court’s duty to construe all facts in favor of the plaintiff at that stage of the litigation (summary judgment), the court found plaintiff may have been required to attend “psychological” counseling.

The court then determined that such counseling qualifies as a “medical examination” as defined in the ADA, based in large part on the first three factors of the seven-factor test set forth in the EEOC Guidance. As to the first two factors, the court noted that the counseling was to be administered by a health-care professional, who would interpret any information obtained from the plaintiff in the 28

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course of the counseling, which “was the reason why [the employer] insisted that [the plaintiff] attend the counseling.” As to the third factor, whether the counseling was designed to reveal a mental health impairment, the court noted the employer was concerned that plaintiff was suffering from depression to the point of suicidal ideation. Accordingly, the court found the third factor also reflected that the counseling was a “medical examination.” Based on these findings, the Sixth Circuit reversed the district court and remanded the case for the district court to determine whether the employer’s desired counseling was “job related” and “consistent with business necessity,” as required to be permissible under the ADA.

Recommendations for Employers Requiring an employee to obtain counseling from a health care professional – even if that individual is not a licensed psychiatrist or psychologist – may qualify as a "medical examination" prohibited by the ADA. Of course, the more formal the medical training and credentials of the counselor, the more likely the counseling will be considered a “medical examination.” In light of Kroll, employers need to carefully evaluate whether to require counseling, therapy or other forms of treatment just as they would any “medical examination” under the ADA. That is, they must carefully determine whether the request (even a recommendation for anger management counseling) meets the ADA tests for "job relatedness" and "business necessity." When engaging in this analysis, employers should bear in mind that an employee who undergoes counseling could potentially uncover mental impairments wholly unrelated to issues the employee may be exhibiting at work. In other words, requiring employees to seek counseling may open a “Pandora’s Box” of issues the employer never intended to uncover or address.

As a practical matter, the decision in Kroll may prove problematic because it creates the potential for liability in situations where the employer is understandably concerned for the employee’s well-being.

Human resources professionals frequently encounter employees with performance or workplace conduct problems stemming from personal issues. A natural and human reaction is to assist the affected employee, perhaps by encouraging the person to seek counseling. Where this encouragement is interpreted as a directive, however, it opens the door to the ADA’s general prohibition against requiring employees to submit to medical examinations. Even where the counseling is clearly not required, merely suggesting counseling may increase the potential for an employee to claim that he or she is "regarded as" having a disability, which is a prohibited basis for discrimination, whether or not the employee is actually disabled. Although there may be situations that are serious enough to warrant a requirement that an employee seek counseling, such as when a co-worker’s safety is put at issue, Kroll underscores the need to proceed with caution and seek legal counsel before requiring an employee to obtain treatment to ensure that it complies with the ADA.

Lisa Lichterman Leach Shareholder, Littler Mendelson lleach@littler.com www.littler.com

R. Alex Boals Associate, Littler Mendelson rboals@littler.com www.littler.com

Daphne Large

Named 2013 NCRA President The National Consumer Reporting Association (formerly the National Credit Reporting Association) recently named Daphne Large, Data Facts President & CEO, the 2013 President. Julie Wink, EVP of Data Facts, was also named the Co-Chair of the Education & Compliance Committee.

November 8, 2012 — The National Consumer Reporting Association (NCRA) has recently appointed President & CEO of Data Facts, Daphne Large, as the 2013 NCRA President, and named Julie Wink, Data Facts Executive Vice President, as the Co-Chair of the Education and Compliance Committee.

Data Facts has worked closely with the NCRA for many years and the NCRA is delighted to have both Large and Wink in such influential positions in 2013. NCRA Executive Director Terry Clemans recently had this to say about Large’s impending Presidency: “Daphne has been a one of the best leaders to serve on NCRA’s board since I became Executive Director in 2001. She became a director in 2007, has been an excellent Treasurer for the past 4 years and also

served as Vice President this year. I greatly look forward to starting this new chapter in NCRA history, renamed the National Consumer Reporting Association to reflect the wider scope of NCRA’s membership, with her at the helm.”

And when recently asked about her new position at the NCRA, Large responded: “It’s an exciting time at the National Consumer Reporting Association as we celebrate our 20th year and reflect on how the industries we serve and our businesses have evolved during this time. We are most fortunate to have a highly tenured and experienced Board of Directors along with the outstanding leadership and representation of our Executive Director, Terry Clemans. We will remain focused on staying engaged with any legislative or oversight concerns affecting our future, compliance and educational opportunities to offer relevant training and programs, and continue to support our members as they deliver the highest level of service through best practices, core competencies, and consistency.”

For the past year, Wink has served on Education, Legislative and Strategic committees for the NCRA, and recently had this to say: “For years, the NCRA has been a pivotal source for continued growth, compliance and dissemination of vital information. This year will be no different. As the upcoming year continues to bring forth new challenges with the expectation of positive and gratifying results for the mortgage industry, our involvement with the NCRA will ensure that our team and customers are kept abreast of all changes and updates. As Co-Chair of the Education and Compliance Committee, I hope to keep Data Facts as a leader in its quest to aid our partners in continued awareness. The NCRA, Data Facts & our partners all have the common goal to ensure that all data is information you can trust.”

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S IT B

E

N

E

F

is the engagement letter. This letter will describe the scope of work to be performed, the timing of the audit and the audit fees.

The engagement letter should also describe responsibilities for the auditor, as well as the plan administrator.

Employee Benefit Plan Audits: Why selecting the right auditor is critical

By Linda Lauer

Federal law requires certain employee benefit plans to have an audit to be filed with the annual Form 5500. For most plans, if there are 100 or more eligible participants as of the first day of the plan year, then the plan must obtain an audit. The plan sponsor or administrator is responsible for engaging the auditor.

Department of Labor (DOL) statistics indicate there are approximately 75,000 ERISA audits performed annually by over 10,000 CPA firms. Only a small percentage of these CPA firms audit more than 100 employee benefit plans on an annual basis. Surprisingly, there are approximately 8,000 CPA firms performing five or less employee benefit plan audits and 5,000 CPA firms performing only one employee benefit plan audit. As result of so many plan audits being performed by CPA firms with little experience in these types of audits, the DOL continues to find a significant number of employee benefit plan audits do not meet DOL requirements.

What should you look for in an auditor?

First and foremost, the auditor should be licensed or certified as a public accountant by a state regulatory authority. In the state of Tennessee all certified public accountants can be found on the Tennessee State Board of Accountancy website at www.tn.gov/commerce/boards/tnsba.

You may also want to determine if the audit firm is a member of the American Institute of Certified Public Accountants Employee Benefit Plan Audit Quality Center. This is an organization “to help CPA’s meet the challenges of performing quality audits” specifically for employee benefit plans. The audit quality center is a firm based voluntary membership center for firms that audit employee benefit plans. A plan sponsor can search the directory maintained on the center’s website for firms that are members. The website is www.aicpa.org/interestareas/employeebenefitplanauditquality/pages/ebpaqhomepage.aspx.

The auditor should not have any financial interest in the plan or the plan sponsor…this may affect their ability to render an objective, unbiased opinion regarding the financial condition of the plan.

The auditor should be experienced in auditing employee benefit plans. According to DOL statistics, one of the most common reasons for deficient accountant’s reports is the failure of the auditor to perform certain tests unique to employee benefit plans. The more training and experience an auditor has with employee benefit plans, the more familiar the auditor will be with benefit plan practices and operations. In many cases, a less experienced auditor will be assigned to perform routine audit procedures in order to reduce audit costs. Because most plan audits are performed during the summer months (July 31 and October 15 deadlines), many audit firms will use employee benefit plan audits as “off-season” work and will assign first or second year staff to these engagements with little or no experience in understanding employee benefit plans.

What to expect during the audit?

Once you have decided on your auditor, one of the first things you will receive from the auditor 30

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The auditor will most likely provide you with a list of items needed in order to perform the audit. These items should include reports from your third party administrator, record keeper and/or custodian. In addition, payroll records are usually reviewed, along with a sample of employee personnel information.

Once the audit is completed, the auditor will issue his or her audit report. This audit report should be attached to the Form 5500 for filing with the DOL. The auditor should communicate to the plan administrator or plan sponsor any significant issues identified during the audit, or suggestions for improvement in processes.

What information should the auditor test?

There are several areas the auditor should test, but a few of the more problematic areas include: investments, plan and employee contributions, distributions, expenses, individual participant accounts and eligibility.

When testing investments, the auditor will either perform a limited-scope audit or a full-scope audit. The type of audit should be described in the engagement letter and the fees will depend on the type of audit. Under the limited-scope audit, the auditor is exempt from performing any auditing procedures with respect to investments held in the plan. The only way an auditor can perform a limitedscope audit is when the custodian or TPA provides the auditor with a certification. A certification may only be provided by a bank, an insurance company or a trust company. If a certification cannot be provided, then the auditor must perform a full-scope audit. In this case, the auditor will need to test the existence of the investments held in the plan along with the fair value of the investments as of the last day of the plan year. The full-scope audit usually takes considerably more time than the limited-scope audit, and therefore will usually increase audit fees.

In testing employer contributions, the auditor should refer to the plan document to determine what types of contributions are allowed by the

plan. Once these have been determined, as well as if contributions have been made by the employer, the auditor should test these contributions to ensure the contributions were calculated correctly and allocated to the correct participants. For testing individual employee contributions, the auditor should reconcile amounts withheld from the employee’s paycheck to an election form signed by the employee to ensure the employee’s election matches what the employer is withholding.

The auditor should also select a sample of payments made to participants during the year and test these distributions in accordance with the plan document provisions as well as the participants request on how the distribution is to be made. For example, the auditor may review the distribution request form to determine whether the participant elected to have the distribution rolled over to another qualified plan or Individual Retirement Account, or to have a payment made directly to the participant.

It is important for the auditor to test individual participants for eligibility. This testing will require a review of the plan document to determine which employees are eligible to participate in the plan. The auditor should select a sample of participants to test for eligibility, which will usually require a review of employee personnel files for demographic information such as date of hire and date of birth.

Deficient audits

The DOL performs routine inspections of auditors performing employee benefit plan audits. Some of the deficiencies found in these inspections include the following:

Failure of the auditor to adequately plan the audit

benefit plan industry. The audit firm should also conduct internal reviews or inspections of their audits, as well as conduct annual training to their staff specifically tailored to the unique characteristics of employee benefit plans.

A quality audit will not only help protect the financial integrity of your employee benefit plan, but will also help ensure the funds will be available to pay benefits. An incomplete, inadequate or untimely audit report may result in penalties being assessed against the plan sponsor. As the plan’s administrator, it is imperative for the plan sponsor to hire an auditor with specific experience in employee benefit plans in order to minimize your risk for any such penalties.

Linda Lauer Managing Director, CBIZ MHM, LLC; and Shareholder, Mayor Hoffman McGann P.C. llauer@cbiz.com

Using inadequate audit programs No evidence of any audit work performed in regards to investments, contributions, benefit payments, participant data or prohibited transactions.

Failure to test year-end values on investments and failure to test investment transactions (for full-scope audits)

Jackson Lewis is proud to announce that Memphis

Failure to test payroll and deferrals for employee contributions

James R. Mulroy III and James H. Stock, Jr.

Failure to test eligibility to receive distributions Failure to test eligibility to participate, forfeitures and allocations to participant accounts

In some cases, if the audit is found to be significantly deficient, the DOL will make a referral of substandard work to the American Institute of Certified Public Accountants (AICPA) and the state boards of accountancy. The DOL may reject the Form 5500 filing as a result of a deficient audit. As in most areas surrounding the administration of an employee benefit plan, the responsibility of ensuring your audit is in compliance with DOL standards lies in the hands of the plan sponsor. If an audit is found to be deficient by the DOL, the plan sponsor can be held responsible and may be required to remedy the situation, which can include substantial penalties.

partners J. Gregory Grisham, were selected for inclusion in the 2013 edition of

The Best Lawyers in America

®

With over 700 attorneys practicing in 49 locations nationwide, Jackson Lewis provides creative and strategic solutions to employers in every aspect of employment, labor, benefits and immigration law.

Our firm has one of the most active employment litigation practices in the U.S., including a current caseload of over 5000 litigation matters and 300+ class actions. To learn more about our services, please visit us online at www.jacksonlewis.com.

Best practices for auditors

Best practices for auditors performing employee benefit plan audits include a commitment to quality from the top down within the accounting firm. The firm should make “employee benefit plan audits” a specialized or niche practice within their firm and devote specific resources to this area of practice with expertise in the employee

999 Shady Grove Road, Suite 110 • Memphis, TN 38120 (901) 462-2600 • MulroyJ@jacksonlewis.com

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A L M F

THE FAMILY AND MEDICAL LEAVE ACTNavigating a Regulatory Minefield

By Ge offrey A. Lindley and Latosha Dexter

T

he Family and Medical Leave Act (FMLA) applies to employers who employ fifty or more employees at one or more sites within a seventy-five mile radius for at least twenty workweeks in the current or preceding calendar year. The twenty workweeks do not have to be consecutive. The Act requires covered employers to provide eligible employees with up to twelve weeks of unpaid leave during any twelve month period for certain specified reasons, including the employee’s serious health condition, the serious health condition of specified family members, the birth or adoption of a child, and a qualifying exigency arising out of the fact that the employee has a spouse, son, daughter, or parent that is on active duty or has been notified of an impending call or order to active duty in the Armed Forces in support of a contingency operation . Further, the FMLA also gives an eligible employee who is a spouse, child, parent, or next of kin of a covered service member the right to take up to twenty-six weeks of unpaid leave in a single twelve month period to care for the service member.

Much like the federal Fair Labor Standards Act of 1938 (FLSA), the FMLA is driven by extensive regulation, which can create a minefield for employers to navigate. The original regulations went into effect on April 6, 1995, and they were most recently updated on January 16, 2009; and while the regulations were intended to advance the purpose of the statute, they unfortunately often provide a source of frustration for human resource professionals.

Nevertheless, a good command of the regulations is essential for HR managers so that they can successfully steer their companies clear of any FMLA violations. Based on these authors’ experience in working with employers on FMLA compliance issues and defending employers in litigated FMLA cases, there are certain areas of the regulations that require more focused attention from HR departments in order to prevent FMLA abuse by employees.

Designation of the twelve month period: An employer is permitted to choose any one of four methods to determine the twelve month period for leave entitlement: (1) the calendar year; (2) any fixed twelve month “leave year,” such as a fiscal year, a year required by State law, or a year starting on an employee's “anniversary” date; (3) the twelve month period 32

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measured forward from the date any employee's first FMLA leave begins; or, a “rolling” twelve month period measured backward from the date an employee uses any FMLA leave. In determining the appropriate method for the calculation, employers should be mindful of the effect of each method.

For example, while using a calendar year may be easier to track leave, that method could potentially allow an employee to take up to twenty-four weeks of leave in a row for a serious health condition if the condition spans the end of one calendar year and the beginning of another. Such would not be the case when using the rolling year method. If an employer fails to formally adopt and communicate its adoption of one of the methods of calculation, an employee will be allowed to use the method most beneficial to him or her.

Designation of leave: An employee need not specifically request FMLA leave or even mention FMLA leave in order to qualify. If the employee provides at least verbal notice of a condition that could qualify for FMLA leave, the burden is on the employer to request more information from the employee in order to determine if the FMLA is implicated. Employees do not have the right to decide when they want leave designated as FMLA leave. Therefore, if the situation calls for FMLA leave, and the employee requests time off work, an

employer should formally designate the time as leave under the FMLA. An employer must notify employees, in writing, within five business days of making the determination whether leave has been designated as FMLA leave.

Certification: An employer may require an employee to obtain a medical certification from a health care provider justifying the employee’s need for FMLA leave. Many employers miss the opportunity to challenge untimely and insufficient certifications. At the time of the request for certification, the employer must advise the employee of the consequences for not providing adequate certification. The employer should require that the certification be returned within fifteen calendar days, unless it is not practicable for the employee to do so. An employee’s failure to timely submit certification can support the denial of leave. Further, an employer is not required to accept an incomplete or insufficient certification. If the certification is incomplete or insufficient to allow the employer to determine if the requested time off qualifies for FMLA leave, the employer should advise the employee of the deficiencies in writing and allow the employee at least seven calendar days to respond (again, unless the seven days is not practicable). An employee’s failure to correct deficiencies can also support denial of leave. If the employer disagrees with the opinion of the employee’s health care provider, it may pay for a second opinion.

If the second opinion differs from the employee’s provider, the employer and the employee can agree on a provider to render a third opinion, paid for by the employer, which is binding.

Recertification: Recertification of the employee's or family member's serious health condition may not be requested more than once every thirty days or longer if the minimum duration of the condition is longer than thirty days. However, employers may ask for recertification every six months in all cases, even if the minimum duration is more than six months or the duration is indicated as lifetime, indefinite, or unknown. The employee is responsible for the costs of any recertification requested by the employer. No second or third opinion is allowed for recertification.

Fitness-for-duty certification: Regarding an employee’s serious health condition, employers may require that a fitness-for-duty certification specifically address the employee's ability to perform the essential functions of the job prior to an employee’s return to work and should advise employees of this requirement in the FMLA designation notice.

The certification will generally come from the employee’s health care provider, and no second or third opinion is allowed. However, if the Americans with Disabilities Act (ADA) is also implicated, an employer can require a medical examination at its expense provided that the examination is job related and consistent with business necessity. Further, an employer may not require a fitness-for-duty certification for each absence taken on an intermittent or reduced schedule leave, although such certification is allowed up to once every thirty days if reasonable safety concerns exist.

FMLA leave and other leave: An employer may require that an employee’s FMLA leave run concurrently with other leave offered by the employer (e.g., paid leave such as workers’ compensation and vacation leave or reasonable accommodation leave under the ADA) so long as the leave meets the requirements for designation of leave under the FMLA. At the time of FMLA designation, the employer should advise the employee that any such leave will run concurrently.

Intermittent leave: If an employee needs intermittent leave or leave on a reduced leave schedule, an employer may require the employee to temporarily transfer to an available position for which the employee is qualified and which better accommodates recurring periods of leave.

However, an employer may not require an employee on intermittent leave because of a qualifying military exigency to transfer temporarily during such leave.

Scheduling of planned medical treatment: If medical care is planned by an employee, the employee should consult with the employer about the timing of the treatment to avoid “unduly disrupting the employer’s operations.” Therefore, an employer can ask an employee to schedule medical treatment before work or in the late afternoon to allow the employee to work as much of his or her shift as possible. However, any such agreement between the employer and the employee is subject to the approval of the employee’s health care provider.

Employer call-in policies: The regulations provide that “where an employee does not comply with the employer's usual notice and procedural requirements, and no unusual circumstances justify the failure to comply, FMLA–protected leave may be delayed or denied.” Therefore, employers are entitled to enforce policies that require employees to call a supervisor or another designee and advise when and why they will not report for their regularly scheduled shift.

Policies prohibiting working second jobs: If an employer has a policy that prohibits employees from working a second job, the employer may continue to enforce that policy while an employee is out on FMLA leave.

Bonus eligibility: If a bonus is based on the achievement of a specified goal—such as hours worked, products sold, or perfect attendance—and the employee has not met the goal because of FMLA leave, the bonus may be denied unless otherwise paid to employees who take leave for a reason that does not qualify as FMLA leave. For example, if an employee who used paid vacation leave for a non-FMLA purpose would not be disqualified for a bonus payment because of the leave, then an employee who used paid vacation leave for an FMLA-protected purpose also must not be disqualified.

As demonstrated, FMLA leave can be challenging to properly administer. These authors frequently refer to the regulations and quite often to case law before advising clients on the various aspects of the FMLA and encourage HR professionals to do the same. And in particularly difficult situations, obtaining legal advice before acting may be warranted.

Geoffrey A, Lindley Partner, Rainey, Kizer, Reviere & Bell PLC glindley@raineykizer www.raineykizer.com

Latosha Dexter, SPHR Of Counsel Rainey, Kizer, Reviere & Bell PLC ldexter@raineykizer.com www.raineykizer.com www.HRProfessionalsMagazine.com

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Betsy Weintraub Named to MBJ’s Top 40 Under 40 Betsy Weintraub is an Associate Attorney with Fisher & Phillips, LLP, and is a third generation Memphis lawyer currently practicing labor and employment litigation. As an employment lawyer, Betsy was a panelist at the America’s Safest Companies Conference in Chicago. She spoke on avoiding and handling criminal liability resulting from violations of OSHA regulations.

Betsy was an assistant district attorney in the Shelby County District Attorney’s Office in Memphis prior to joining her Dad, Jeff Weintraub, in The Weintruab Firm in January 2012. Betsy handled 11 jury trials in 2011, serving as first chair on 8 of those and obtaining guilty verdicts in 9 of the 11 trials. Betsy received the District Attorney General’s Award for Distinguished Service in 2011.

In 2004, Betsy started an organization called Operation Entertainment where they collected hundreds of DVDs and sent them to the troops in Iraq and Afghanistan. She is currently mentoring a young man whom she met while she was a criminal defense attorney. He is a convicted felon working on his GED. Betsy is very supportive and helps keep him motivated to achieve his goal.

3 Generations As a TN Prosecutor, Betsy handled 11 jury trials in 2011. She served as first chair on 8 of those and obtained guilty verdicts in 9 of the 11 trials. She had various other bench trials in the civil courts. She’s had over

Betsy received her B.A. in English rhetoric and writing and French from the University of Tennessee, Knoxville, in 2003, and her J. D. from the University of Memphis Cecil C. Humphreys School of Law in 2007.

2013 Mississippi SHRM State Council

2013 Tennessee SHRM State Council Sheryl Ransom

State Director

Valerie Gifford

Director-Elect

Shawn Pellington Treasurer

Chris Byrd, SPHR

State Director

France Gasquet

Secretary

Gregory Payne

Director Elect

Janice Shipman

District Director - West

Judy B. Nail, PHR

Past Director

Tara Brown

District Director - Middle

Melissa Drennan, PHR Secretary | Treasurer

Susan Deaton

District Director - East

Lindsay Carter, Jr. SPHR Diversity Director

Barbara Stewart

State Conference Chair

Aimee Hull

Membership Chair

Jan Farve, PHR Workforce Readiness Director

Jeff Ginsburg Communication and Marketing Chair Kara Shea

Legal and Legislative Chair

Rebecca Harmon Certification Chair Ron Daves & Fred Bissinger

Diversity Co-Chairs

Austin Baker

SHRM Foundation Chair

Tiffany Coursey

College Relations Chair

Bill Cooper

Awards & Scholarships Chair

Mark Travis

Workforce Readiness Chair

Corrine Dennison Professional Development Chair Kellie Conn

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Past Director

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Rusty Turner Governmental Affairs Director Cynthia Render-Leach, PHR College Relations Director Kyle Jones

Social Media Director

Christy Wright, SPHR Certification Director Lisa Smith Robinson

Membership Director

Janna Rogers, SPHR Northern District Director Amanda Ford Southern District Director Jacquelyn Mack, PHR Marketing & Publicity Chair

300 contested hearings. She also received the District Attorney General’s Award for Distinguished Service in 2011.

2013 Arkansas SHRM State Council Kelly DeStefano, SPHR State Director Michele Burns, SPHR, CCP, CBP, GRP State Director Elect &

Leadership Conference Chair Ed Wheeler, PHR Immediate Past State Director Donna Merriweather, SPHR Chapter Advocate Director Steve Schulte Governmental Affairs Director Cathleen Hoffman, SPHR Professional Development Director Holley Little Core Leadership Area Director Tara Mauk Arthur, PHR Communications & Awards Director Charlotte Bradley, PHR, MS At-Large Director Dan Herrington General Legal Counsel Allison Ramsey, PHR State Conference Chair Eric Garvin & Jim A. Harris, Jr., PHR 2014 State Conference Co-Chairs Michael L. Smith, PHR, IPMA-CP Work Force Readiness Director Jeremy D. Wann, PHR SHRM Foundation Director Chanta Wells, PHR Diversity Director Rick Teague, MA, SPHR College Relations Director Christy Owen Certification Director Kathleen McComber, SPHR Membership Engagement Director Jim A. Harris, Jr., PHR Chapter Development Director Darrin Coon, SPHR State Legislative Affairs Director Thomas Dunlap, PHR Federal Legislative Affairs Director Stephanie Amerson, PHR ELLA Chair

th Heal Care rm fo Re

2013 Implementation Check List for the Patient Protection Affordable Care Act Here is a checklist of actions required by January 1, 2013.

States must indicate to the Secretary of HHS whether they will operate an American Health Benefit Exchange.

Itemized Deductions for Medical Expenses

Increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5% of adjusted gross income to 10% of adjusted gross income; waives the increase for individuals age 65 and older for tax years 2013 through 2016.

Flexible Spending Account Limits

Limits the amount of contributions to a flexible spending account for medical expenses to $2,500 per year, increased annually by the cost of living adjustment.

Medicare Tax Increase

Increases the Medicare Part A (hospital insurance) tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly and imposes a 3.8% assessment on unearned income for higher-income taxpayers.

Employer Retiree Coverage Subsidy

Eliminates the tax-deduction for employers who receive Medicare Part D retiree drug subsidy payments.

State Decisions For Creating Health Insurance Exchanges in 2014, as of November 19, 2012 Arkansas – The Executive Branch is planning for a Partnership Exchange and has indicated that they will partner with the federal government to operate an exchange. Other states planning a partnership exchange are Michigan, Illinois, Ohio, North Carolina, and Delaware.

Mississippi – The Executive Branch has declared that they will establish State-based Exchanges. Other states planning State-based Exchanges include California, Colorado, Connecticut, DC, Hawaii, Iowa, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington.

Tennessee – Has not yet indicated whether they will operate a state-based exchange or state-federal partnership exchange, or default to federally-facilitated exchange.

Ten other states that are still undecided include Arizona, Florida, Idaho, Indiana, Montana, New Jersey, Pennsylvania, Utah, Virginia, and West Virginia.

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