Posted on Jan 24, 2018

For several years now, the responsibility for financing one’s retirement has increasingly shifted from the employer to the employee. According to the Bureau of Labor Statistics, over the 15-year period from 1985 to 2000, the primary retirement plan participation of employees moved from defined benefit plans to defined contribution plans, such as 401(k) plans. And that trend has certainly continued.

401(k) Plan Features

A key feature in most 401(k) plans is that participants make their own investment choices from a set of options offered by the plan. The fact that participants make their own investment choices might lead business owners to conclude that participants — and participants alone — are responsible for the consequences of these decisions. However, plan fiduciaries, such as the employer plan sponsor, are not automatically absolved of responsibility for a participant’s investment decisions merely because the plan offered choices and participants made them. In order for a plan fiduciary to escape liability for losses resulting from a participant’s investment decisions, the 401(k) plan must comply with the Employee Retirement Income Security Act (ERISA) Section 404(c).

Exercise of Control Defined

According to the regulations, participants are able to exercise control when they have the opportunity to give investment instructions to an identified fiduciary and when they have the opportunity to obtain sufficient information to make investment decisions. “Sufficient information” includes a description of the investment alternatives, their objectives, risk/return, type, diversification, fees, expenses and sales loads. Participants must also receive an explanation of how to give investment instructions and any limitations. The regulations include specific requirements for plans that offer employer securities as an investment option.

401(k) Compliance With Section 404

According to regulations issued by the Department of Labor, a 404(c) plan is one in which participants have the opportunity to exercise control over assets in their individual accounts (see box below) and the ability to choose how to direct those assets from a broad range of investment alternatives. The regulations spell out in detail how these two requirements are met and how compliance with each aspect is needed to secure the protection that 404(c) offers.

The “broad range of investment alternatives” must include at least three diversified investment options that enable a participant to materially affect the potential return and minimize the risk of large losses. While most 401(k) products today include more than this minimum number of investment options, the plan sponsor (perhaps with the assistance of an investment professional) still needs to determine whether the asset classes and style of the funds offered satisfy the diversification, potential return and risk minimization requirements.

It is important to note that ERISA Section 404(c) imposes no obligation on plan sponsors to offer investment advice to participants. Also, 404(c) protection is only available to the extent that a participant directs the investments of his or her individual account. It also requires several communications to be made to participants, including notice that the plan intends to comply with 404(c) and that participants are responsible for the results of their investment decisions.

Market Factors

Events from several years ago make a strong case for seeking 404(c) protection. Two bear markets in the 2000s hit investors hard, including many 401(k) participants. Market gains that came easy faded quickly and 401(k) balances plummeted. Corporate scandals have led to collapsing retirement plans at affected firms. Questionable trading activity within mutual funds was reported in the news. All these events have focused attention on 401(k) investment performance and the potential liability of plan fiduciaries for investment losses.

Caution: The relief that ERISA Section 404(c) provides plan fiduciaries is not absolute. Regardless of 404(c) compliance, plan sponsors continue to have the duty to act prudently and solely in the interest of plan participants when selecting the investment options offered by the plan. Furthermore, both investment managers and their offerings must be monitored to ensure that there continue to be prudent choices.

NOTE: Under the Pension Protection Act, signed into law in 2006, retirement plan sponsors and fiduciaries are allowed to hire and compensate “fiduciary advisors” to supply investment advice and make investment transactions for participants and beneficiaries of defined contribution plans and beneficiaries of IRAs. A fiduciary advisor can be a registered broker or dealer, a registered investment advisor, a bank or similar financial institution, an insurance company or an affiliate, employee, agent or representative of one of the above.

Posted on Dec 1, 2017

Although several federal laws address pregnancy discrimination, employers need to be aware that it’s generally state and local rules that govern a company’s policies and actions on this important matter. With so much attention paid to the rights of pregnant employees, it’s easy for employers to assume that these workers have more protections than they actually do. On the other hand, some federal laws that affect pregnant women are broader than you might think.

The Pregnancy Discrimination Act and the Americans with Disabilities Act (ADA), for example, cover employees who

  • Are pregnant,
  • Could (or intend to) become pregnant,
  • Have a medical condition related to pregnancy,
  • Had an abortion or are considering having one, or
  • Have been pregnant.

The Equal Employment Opportunity Commission (EEOC) states that “an employer may not discriminate based on past pregnancy or pregnancy-related medical condition or childbirth. For example, an employer may not fire a woman because of pregnancy during or at the end of her maternity leave.”

Basic Protections

In a summary of legal rights for pregnant women, this is how the EEOC addresses the question of whether an employee can be terminated from employment for pregnancy-related reasons: “In general terms, you cannot be fired, rejected for a promotion, given lesser assignments, or forced to take leave” for any of the categories of employees noted above. However, the EEOC also states, “An employer does not have to keep you in a job that you are unable to do or in which you would pose a significant safety risk for others in the workplace.”

With that said, here’s an important caveat: Employers cannot fire or take any other adverse action against a pregnant employee just because you believe she may be jeopardizing her health in her current role; that call must be made by the employee herself.

What’s Healthiest?

Problem is, people — including pregnant women — are often misguided in their thinking about what kind of work conditions are unhealthy during a pregnancy.

For example, while standing all day may be exhausting and possibly harmful to a woman in the late stages of pregnancy, sitting all day at a desk isn’t generally healthy either. Some combination of work positions is probably better. Ultimately, this is a matter for your employee to take up with her doctor. But, if necessary, she should supply you with documentation regarding her special needs.

Because key aspects of the protection of pregnant women in the workplace come under the ADA, women’s rights with regard to pregnancy-related job adjustments fall under the “reasonable accommodation” framework. That is, you’re required to make a reasonable accommodation that allows the employee to perform the “essential job functions” as long as doing so won’t cause an “undue hardship” to your business. Of course, the law’s interpretations of terms such as “reasonable,” “essential job functions” and “undue hardship” are frequently tested by litigation.

Talk it Over

Before poring over thousands of pages of court opinions and interpretive regulations, consider just having a calm discussion with an employee who’s requesting some adjustment to her work conditions. “Engaging in an interactive dialogue with employees to come to a reasonable accommodation shows that employers are making a good-faith effort to comply with the law,” says a Society for Human Resource Management briefing on the topic.

The goal is to find a mutually agreeable solution and document your efforts to do so. But, if that fails and you end up losing the fight against a discrimination claim, the “good” news is that at least you won’t face punitive damages.

The quickest way to get into trouble in dealing with these situations is to neglect to train front-line supervisors on the standards for preventing pregnancy discrimination. An untrained supervisor might try to wing it in response to a pregnant employee’s request and supply the wrong answer.

Moreover, the pregnant employee might accept it at face value at the time. If she later realizes that her rights were violated and some damage was done (such as reduced wages or a physical problem), she may be more motivated to seek a legal remedy.

For employers most accustomed to dealing with accommodation requests from injured workers, here’s a quick reality check when the condition involved is pregnancy: Imagine that a third-trimester pregnant employee requesting an accommodation is instead a worker with a back injury. How would you handle this request? Would you be skeptical and refuse to reach an accommodation? Then, return to reality and apply similar thinking when dealing with a pregnancy-related accommodation request.

As with conventional disability accommodation requests, there’s no guarantee you’ll be able to grant one to a pregnant employee. In both cases, assuming your assessment isn’t challenged (or if it is challenged and you prevail), the employees will still be entitled to 12 weeks of unpaid leave over a 12-month period according to the Family and Medical Leave Act.

Requests for accommodations by pregnant employees have been around a long time and will continue to pop up. And so will questions from employers on just how to handle these situations in fairness to the requesting employee and your business. If you have any doubt that your policies regarding pregnancy and related issues are within the law, you’d be wise to talk over the matter with your trusted legal professionals.

Posted on Nov 17, 2017

Most employers believe their employees expect to work past age 65. A recent survey by the Transamerica Center for Retirement Studies states that one reason for staying on the job longer is that so many older workers experience a shortfall of retirement savings. Another is that many employees don’t want to go cold turkey on the social interaction, stimulation, and sense of accomplishment they get from work. 

More than 80% of surveyed employers say they support the idea of employees working past 65. But only about a third of them allow staff members to downshift from full- to part-time status  ― also known as “phased retirement.” This may change as employers recognize the need to keep experienced workers on board longer.

Employees who welcome the opportunity to switch to part-time work may be even more productive after the change. And employers can benefit greatly by having these seasoned employees available to transfer their skills and job knowledge to the younger workers who come after them.

Labor Shortages

Labor shortages in certain fields and geographic regions also play a role in the changing retirement landscape. The Government Accountability Office (GAO) recently issued a study on phased retirement programs, noting that “Industries with skilled workers or labor shortages are motivated to offer phased retirement because their workers are hard to replace.”

The GAO study also cited data from the Society for Human Resource Executives (SHRM). A member survey stated that phased retirement programs are common among employers with technical and professional workforces. Overall, 5% of SHRM members offer such programs.

And while some employers examined by the GAO had to clear a few regulatory hurdles — specifically structuring benefits in a way that doesn’t violate ERISA anti-discrimination regulations — employers “were able to address various design and operational challenges,” according to the report.

Variety of Models

The study found an assortment of approaches that employers are taking. Here are examples of phased retirement programs used by four unidentified companies:

Example 1: Workers work 80% of full-time for 80% of full-time pay.

  • Primary advantages: Retention of workers and development of future leaders and the ability of the employer to do workforce planning.
  • Who is eligible: U.S. employees at least 55 years old with 10 or more years of service who have achieved or exceeded performance expectations and have management’s permission.
  • Hours reduction allowed: 20%.
  • Length of phased retirement: Any length of time is permissible assuming program standards are met and the manager approves.
  • Knowledge transfer: Workers spend time transferring knowledge, skills and expertise. For each year the worker participates, he or she creates a proposal that includes a knowledge transfer plan with recommendations on how it will ensure business continuity.
  • Effect on health benefits: None.
  • Effect on 401(k) plan: The employer contribution is based on a worker’s full-time salary.

Example 2: Workers and managers develop a structured plan to transfer knowledge and transition to retirement within two years.

  • Primary advantages: Helping the company with workforce planning by encouraging workers to inform the company about their retirement plans and to help transfer their knowledge before they retire.
  • Who is eligible: All workers at least 60 years old who have been employed by the company for five years or more and have permission from their managers and the human resources department.
  • Hours reduction allowed: Automatic approval to reduce work hours by 20% to 50%. Those wishing to work less than 50% may submit a request to do so, though they would lose eligibility for health benefits.
  • Length of phased retirement: From six months to two years.
  • Knowledge transfer: This is a large program component, with many tools and guidelines.
  • Effect on health benefits: Benefits remain the same as for full-time employees (with the caveat above for those wishing to work less than 50% of full-time).
  • Effect on retirement benefits: No plan contribution formula change, but pay upon which the employer contribution is based changes in proportion to the worker’s reduced salary.
  • Other: The employer maintains a group of standby workers to fill in throughout the company if a spike in work demand occurs.

Example 3: Phased retirement program is available to workers in units that have implemented the program.

  • Primary advantages: Worker retention and knowledge transfer, training and mentoring of remaining staff.
  • Who is eligible: At management’s discretion. Can begin at any age.
  • Hours reduction allowed: Participants typically work 60% of full-time.
  • Knowledge transfer: An expectation that participants will mentor or train staff, but there’s no formal program to ensure that this happens.
  • Effect on health benefits: If employee works more than 60% of full-time, no reduction in benefits. Health benefits stop at age 65 for all workers.
  • ·Effect on retirement benefits: None.

Example 4: Workers must transition into full retirement within three years.

  • Primary advantages: Participants gain the ability to adjust to full retirement by reducing their workloads gradually while still contributing to their business units.
  • Who is eligible: Certain workers who are age 57 or older and have completed at least 10 years of service.
  • Hours reduction allowed: 25% to 50%.
  • Length of phased retirement: A maximum of three years.
  • Knowledge transfer: No such requirement.
  • Effect on health benefits: None.
  • Effect on retirement plans: Employer contributions are proportionally reduced during phase-out period.

These examples illustrate some of the diversity of existing phased retirement programs. If you’re not sure how beneficial such a program would be for your business, perhaps launch one on a trial basis and then assess the results. Also, keep in mind that navigating the legal and regulatory implications of implementing such a program ― particularly with respect to employee benefits ― requires guidance from a qualified attorney.

Posted on Oct 16, 2017

The Pension Protection Act, passed in 2006, gave a major boost to automatic enrollment 401(k) plans. These plans enable companies to include employees in their plans unless they choose to opt out of participation. Now, new proposed regulations provide guidance for default investments. Auto-enrollment plans were available before the law passed. But the Pension Protection Act overcomes certain state law hurdles that hindered these plans in the past. Employers can limit the automatic feature to new-hires or extend it to the existing workforce. To further encourage retirement savings, the new law makes it easier for employers to automatically increase the percentage of an employee’s salary directed to the account.

“Too many workers, some overwhelmed by investment choices or paperwork, are leaving retirement money on the table by not signing up for their employers’ defined contribution plan,” said Former U.S. Labor Secretary Elaine L. Chao. “This regulation would boost retirement savings by establishing default investments for these workers that are appropriate for long-term savings.”

One likely side effect of installing an auto-enrollment plan is larger allowable salary reduction contributions for higher-paid employees, because lower-paid workers are contributing more.

Prior to the Pension Protection Act, plan sponsors were often reluctant to assume the responsibility for making investment decisions without specific direction from participants. Thus, the sponsors typically sought to minimize exposure by limiting default investments to money market funds and other conservative vehicles.But once a company decides on an automatic enrollment plan, the question is: Where to invest the money?

Now plan sponsors have more options. Under the new Labor Department regulations, a participant is treated as exercising sufficient control over the account assets if these six basic requirements are met:

  • Assets invested on behalf of participants are allocated to “qualified default investment alternatives.”
  • Participants have the opportunity to direct investment of the assets in their accounts (but not direct the assets).
  • Participants must receive adequate notice.
  • Materials provided to the plan about investments are made available to participants.
  • Participants have sufficient time to transfer assets.
  • The 401(k) plan must offer a range of investment alternatives.

Default investments should be diversified to minimize the risk of large losses. In addition, if a participant chooses not to direct the investment of assets in his or her account, age is the only objective and readily available factor for making an investment decision on his or her behalf. Other factors — including risk tolerance and total investment assets — do not have to be taken into account.

In summary: The Pension Protection Act can result in key changes for your company’s plan. According to the Labor Department, approximately one-third of eligible workers do not participate in their employer-sponsored 401(k) plans. With the new regulations, your company can increase participation dramatically. Consult with your tax adviser and benefits professional to find out how to take advantage of the new law and to help ensure compliance.

Posted on Sep 27, 2017

Under Equal Employment Opportunity Commission (EEOC) regulations promulgated in September 2016, certain employers were required to add compensation data to their annual employee census reports. The affected employers were those having 100 or more employees (50 or more for federal contractors). This additional information would have to be included in 2017 reports submitted by March 31, 2018.

For now, the requirement to report compensation data has been put on hold by the Office of Management and Budget (OMB), a federal agency that assesses the compliance of other agencies with the Paperwork Reduction Act. “Among other things, the OMB is concerned that some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentially issues,” the OMB stated.

This delay may not permanently invalidate the principle behind the expanded reporting rule. However, it does mean that the EEOC must go back to the drawing board and submit a new, less burdensome “information collection package” for review. The OMB also directed the EEOC to remind employers that they still need to submit EEO-1 forms for 2017 by the March 31, 2018 deadline, using the original data elements (on race, ethnicity and gender) but not salary information.

Cost of Compliance

The U.S. Chamber of Commerce had urged the OMB to put the brakes on the expanded EEO-1 form. When it originally proposed its broader scope reporting requirement, the EEOC estimated the added effort involved would cost all impacted employers overall, around $54 million. The Chamber estimated the cost would be closer to $400 million.

The original aim of the EEOC’s expanded reporting format was to “improve investigations of possible pay discrimination which remains a contributing factor to persistent pay gaps.” It also suggested that data, presented in that format, could be useful to employers themselves to help them identify possible patterns of inadvertent race or gender-based pay discrimination.

With these goals in mind, nothing prevents employers today from conducting their own internal analyses to look for any discriminatory pay patterns, and take corrective actions. “The EEOC remains committed to strong enforcement of our federal equal pay laws,” the agency’s temporary leader, Victoria Lipnic, said in response to the OMB’s decision.

Exempt Employee Threshold

Right on the heels of the OMB action came an important ruling by the U.S. District Court for the Eastern District of Texas. That court finalized the preliminary injunction it had issued last November, blocking implementation of new DOL overtime pay regulations that would dramatically affect many employers and employees. Those regulations were originally unveiled in May 2016 and were set to take effect on December 1, 2016.

For now at least, the opinion issued by the court means that the threshold below which all employees would be eligible for overtime pay, regardless of the nature of their jobs, remains unchanged, at $455 per week ($23,660 annualized). Under the regulations blocked by the court, that weekly wage threshold would have slightly more than doubled, to $913 ($47,576 annualized).

The regulations also called for an automatic inflation-based readjustment of the pay threshold at regular intervals. The Texas court rejected that part of the regulations, too, on the same basis as it rejected the main part of the regulation — that the DOL had exceeded the authority it had been granted under the Fair Labor Standards Act.

Action Already Taken

In the months before the new regulations were officially rejected by the Texas court, many employers had already prepared to incorporate the changes. Some took steps to ensure that employees whose earnings were between the old, lower threshold and the new, higher one didn’t put in overtime hours. Many also raised the salaries of workers with earnings that were already just below the $47,576 threshold, to meet or slightly exceed that amount. By so doing, they hoped they would still come out ahead by not having to worry about paying time-and-a-half to those employees who satisfied the exempt status duties test.

After the Texas court imposed the preliminary injunction blocking the new regulation last November, few employers that had already taken those steps reversed themselves, particularly  pay raises, on the basis of the court’s action. The feeling was that taking back pay raises ultimately would have proven more costly to the employer than leaving them in place, given the damage it would do to the morale of affected workers.

What Can Employers Expect Now?

While the plans for change have been sidelined for now, it doesn’t mean that employers will never face the same issues. First, even before the Texas court had issued its final ruling, under  the Trump Administration, the DOL had announced it was planning to reconsider the regulations that had been suspended by the Texas court. Specifically, the DOL asked for input on what an appropriate threshold might be. This seems to indicate that while the DOL believed the threshold should be raised, the original plan might have raised it too high.

Also, the U.S. Court of Appeals for the 5th Circuit is reviewing the case, and could, in theory, overturn the lower court’s decision. Chances are, employee advocacy groups are currently urging the court to do so.

Bottom line: There’s little reason for employers to change whatever course of action they chose just before the DOL regulations were supposed to go into effect. An employment law attorney or HR advisor can help you take a closer look at the issue as it applies to your specific situation.

Posted on Aug 2, 2017

Whether a claim is unfounded or not isn’t apparent until it’s investigated, of course. But if statistics from the Equal Employment Opportunity Commission (EEOC) provide any insight, it’s worth noting that retaliation claims — the most common form of complaint — rose by 6% last year.

These claims involve allegations that employers took adverse action against employees who filed discrimination complaints. When an employer is found to have retaliated against a worker who files a complaint, that employer is culpable, even if the original discrimination charge proves to be invalid.

Only about one-third of retaliation charges addressed last year were determined to have had a “reasonable cause,” a fact which hasn’t changed much since the year 2000. Fighting such claims is time-consuming and disruptive, but generally necessary to avoid being stigmatized as a “bad” employer, not to mention to avoid incurring expensive penalties.

Going to the Mat

A recent federal case illustrates how far an employer might have to go to defeat an unfounded discrimination claim. A U.S. citizen of Arabic descent was given a low performance rating, and complained to the HR department that a supervisor had made a racially offensive remark. The employee was placed on a performance improvement plan, and claimed that the plan was in retaliation for his complaint about that remark.

He was transferred to another department, and two months later received another poor performance review. In keeping with company policy, the employee’s performance was later evaluated by a committee, which ultimately upheld the new supervisor’s negative review. The employee was terminated shortly thereafter.

The EEOC concurred with the employee’s retaliation claim, but the employer appealed the case to a U.S. District Court for the Southern District of Texas, which rebuffed the EEOC. The EEOC then sought help from the 5th Circuit Court of Appeals, which upheld the District Court’s ruling, seven years after the employee made his first retaliation complaint.

Lessons Learned

Needless to say, few employers have the legal budget or the appetite to stick to their guns fighting such a case all the way up to a federal appellate court. But the actions that the employer took ultimately brought vindication, and now offer important lessons to others. Here’s a quick summary of what happened in this case, which reveals why the employer may have prevailed.

  • The negative review didn’t happen until about 10 months after the employee had joined the company, suggesting that he was given plenty of time to prove himself.
  • The employer took the worker’s original discrimination complaint seriously, and transferred him to another department. The purpose of the transfer wasn’t to concede any wrongdoing on the original supervisor’s actions, but to give the worker an opportunity for a fresh start.
  • After the second supervisor gave the employee a negative review, a committee was formed to assess that review.

By taking all these measures, it was abundantly clear that the employer proceeded with intention and hadn’t acted rashly. But knowing when to “go to the mat” to defend your company against an unfounded claim isn’t always so clear.

Tips from the EEOC

Here’s what the EEOC says when it comes to developing a strategy for your company, which may help you nip employment discrimination claims in the bud.

General policies should:

  • Train human resources managers and all employees on Equal Employment Opportunity (EEO) laws.
  • Implement a strong policy based on EEO laws that’s embraced from the top levels of the organization.
  • Train managers, supervisors and employees on the policy’s contents, then enforce it and hold them accountable.
  • Promote an inclusive culture in the workplace by fostering an environment of professionalism and respect for personal differences.
  • Encourage open communication and early dispute resolution, which may minimize the chance of misunderstandings escalating into legally actionable EEO problems. An alternative dispute-resolution (ADR) program can help resolve EEO problems without the acrimony associated with an adversarial process.
  • Establish neutral and objective criteria to avoid subjective employment decisions based on personal stereotypes or hidden biases.

When it comes to recruiting, hiring and promoting employees, keep these principles in mind. It’s important to:

  • Implement EEO practices designed to widen and diversify the pool of candidates considered for employment openings, including positions in upper-level management.
  • Monitor for EEO compliance by conducting self-analyses to determine whether current employment practices disadvantage people of different races or treat them differently.
  • Analyze the duties, functions and competencies relevant to jobs. Then create objective, job-related qualification standards related to those duties, functions, and competencies and consistently apply them when choosing among candidates.
  • Ensure that selection criteria, such as education requirements, don’t disproportionately exclude certain racial groups. The exception might be if the criteria are valid predictors of successful job performance and meet the employer’s business needs.
  • Make promotion criteria available for employees to read, and also make sure job openings are communicated to all eligible employees.
  • Instruct outside agencies that you may use for recruitment not to search for candidates based on race or color. Both the employer that made the request and the employment agency that honored it would be liable.

Adopt a Policy

And finally, to minimize the chances of facing any harassment charges, adopt a strong anti-harassment policy, periodically train each employee on its contents, and vigorously follow and enforce it. The policy should include:

  • A clear explanation of prohibited conduct, with examples;
  • A detailed complaint process that provides multiple, accessible avenues of complaint, and a prompt, thorough, impartial investigation;
  • Assurance that the employer will protect the confidentiality of harassment complaints to the extent possible, and protect employees from retaliation;
  • A reasonable expectation that the employer will take immediate and appropriate corrective action if it’s determined that harassment has occurred.

The above may appear to be a daunting “to do” list, particularly if you haven’t yet given much thought to avoiding discrimination in your workplace. But every long journey begins with a single step, and the sooner you take that step, the lower the probability that you’ll wind up with a figurative knock on the door from the EEOC.

Posted on Aug 1, 2017

Presumably you have a holiday and vacation policy already in place. But what if it’s not working well for your company or your employees?

For example, if it’s vague, you may have to make decisions on the spot when an employee asks for days off at a time that is inconvenient for you and possibly for other members of your team. That can result in hard feelings if you have to say no, or extra work for you and others if you feel compelled to approve the request.

In constructing a policy, while it’s useful to consider what a perfect world would look like from your perspective, it’s also essential to begin with considering what other employers in your labor market are doing. That way you can be sure you’re reasonably competitive without giving away the store (see “Is Your Holiday Policy Competitive” below).

Vacation Request Procedures

A solid vacation policy will spell out the requirements for submitting time-off requests. For example, you might choose to give employees greater freedom to choose days off the further in advance they make the request. The more lead time you have to plan around vacation schedules, the less of a burden an employee’s absence imposes on you and your team.

Workers who make last-minute requests should know that they may be turned down. To avoid misunderstandings, define what your company means by last minute. Depending on the complexity of your scheduling, it could mean two days in advance, or two weeks or even more.

It’s also important to set a policy that establishes priority, when more than one employee asks for vacation leave for the same period of time. If three key people from a six-member department all want to take the last two weeks of August, who gets priority?

Basic prioritization systems include seniority, and first-come-first-served, or some combination of those two.

A third option is a rotational scheme. This involves having a team agree to make their vacation scheduling requests at the same time. Employees are randomly assigned a number indicating place in the request sequence, such as a number between one and six for a department of six.

The six employees then get to make their vacation requests according to the number they choose. But the employee who drew the number one moves to the end of the line (to number six) in the next round, number two moves up to number one, and so on.

Optimal Timing

If your company experiences annual slow periods, you may choose to encourage employees to take vacations during slow periods. That encouragement could take the form of a requirement that half of employees’ vacation time be used during such slow periods. However, for employees with children, school vacation schedules will be a major consideration, and you’d want to be as accommodating as possible for those workers, without leaving yourself open to an accusation of favoritism.

Some companies elect to go into a “hibernation” mode during a traditionally slow period, and essentially shut the place down, requiring employees to use most of their vacation days at that time. This is a common practice in several European countries. Employees plan around it, and nobody is left holding the bag, having to pick up the slack caused by other employees’ vacation schedules.

Cooperative Approach

Finally, if your workforce is cooperative and flexible (or you’re working to make it so), consider trying a collective process for setting vacation schedules. In other words, let a team work things out among themselves, taking into consideration each other’s needs and priorities, as well as the effectiveness and productivity of the team as a whole. Your role is to stay out of the discussions as much as possible, empowering team members to come up with their own solutions.

Potential benefits of this approach:

  • Fostering teamwork,
  • Experiencing minimum disruption to team workflow, and
  • Avoiding having to play the role of heavy.

Remember, establishing a vacation and holiday policy involves a balancing act between the operational needs of the business and employees’ desires. The process may be more of an art than a science. It’s up to you to find that proper balance.

Is Your Holiday Policy Competitive?

According to the Society for Human Resource Management (SHRM) 2017 survey, most employers pay a premium to employees when they are asked to work on holidays. Among those that do, 40% pay double-time wages to non-exempt workers, and 21% pay time-and-a-half.

Relatively few allow employees to take a floating holiday — that is, the opportunity to pick an alternative day off to a standard holiday, such as taking July 5 off instead of July 4. Similarly, only about 18% allow full-time employees to swap holidays, for example, take Chinese New Year’s day off in lieu of January first.

In case you’re wondering how your company’s holiday policy stacks up to other companies, here are the results of a 2017 SHRM surveyentitled Holiday Recognition Prevalence.


Percentage of surveyed employers recognizing
these holidays

Thanksgiving 97%
Friday after Thanksgiving 75%
Christmas Day 95%
Christmas Eve 62%
Week between Christmas and New Year’s Day 15%
Labor Day 95%
Memorial Day 93%
July 4 93%
New Year’s Day (Sunday in 2018) 98%
Monday after New Year’s Day (2018) 72%
Easter Sunday 51%
Good Friday 27%
Martin Luther King Jr. Day 39%
Presidents’ Day 34%
Veterans’ Day 19%
Columbus Day 11%
Posted on Jul 31, 2017

Sexual harassment on the job remains a problem in many workplaces.

And most often, charges are filed by female employees against males. But in a recent case, the Tenth Circuit U.S. Court of Appeals rejected a district court’s ruling that a man’s sexual harassment charges against a female supervisor were improperly handled. The appeals court sent the matter back for further review.

Facts of the Case

A male mechanic for a trucking firm sued his employer for sexual harassment caused by his direct supervisor, a female who also was a shareholder in the firm. The employee alleged that he was fired because he refused to have sexual relations with the woman.

The mechanic completed the intake questionnaire that’s required in order to file a claim with the Equal Employment Opportunity Commission (EEOC). He checked the boxes for “Sex” and “Retaliation” as the reasons for his claim, as well as writing out “sexual harassment.”

In response to questions seeking more detailed explanations, the employee wrote “see attached,” referring to a six-paragraph statement he had prepared. The attachment concluded with the statement that he was terminated because he refused to agree to the supervisor’s sexual advances and rejected all such efforts by her.

Change of Form

Apparently, however, the EEOC didn’t receive the attachment, so it used a charge form based on the questionnaire alone. This form laid out the basics of the allegations, which were:

  • The mechanic was subjected to sexual remarks by his supervisor.
  • He complained about the sexual harassment to the general manager and other owners.
  • Nothing was done before the supervisor terminated his employment.

The charge, however, didn’t specify the information that was included in the attachment about unwanted sexual advances.

The EEOC issued a right-to-sue letter and the mechanic sued in federal court. He initially made two claims:

  1. “Quid pro quo” harassment, which occurs when a worker suffers an employment action such as termination for refusing a supervisor’s demands for sex, and
  2. Hostile environment harassment, which occurs when a course of conduct makes a work environment abusive.

He later dropped the hostile work environment claim.

The U.S. District Court dismissed the claim as being deficient because the charge form didn’t include the missing attachment spelling out the quid pro quo allegations. Undaunted, the mechanic appealed.

Different Outcome

The Tenth Circuit Court of Appeals was more sympathetic to the man’s plight. It determined that the charge form contained sufficient allegations to trigger an investigation into:

  • What the sexual remarks were
  • Why the employee was fired, and
  • Whether the two events were connected.

The court noted that the Supreme Court cautioned that the quid pro quo and hostile environment forms of sexual harassment aren’t “wholly distinct claims.” Instead, they’re shorthand for different ways in which such harassment can occur (see Ellerth, 524 U.S. at 754).

The appeals court refused to require that the charge be more specific about the type or form of harassment alleged. (Jones v. Needham , 2017 BL 159166, 10th Cir., No. 16-6156, 5/12/17 )

Background Information

The case highlights the two main types of sexual harassment that are subject to legal action under Title VII of the Civil Right Act:

1. Quid pro quo harassment. This occurs when employment decisions are determined by whether or not a person submits to sexual advances or demands. For instance, an employee may lose a promotion, a plum assignment or even his or her job if he or she doesn’t give in.

Specifically, unwanted sexual advances, requests for sexual favors or other verbal or physical conduct of a sexual nature constitute quid pro quo sexual harassment if:

  • Submission to such conduct is either explicitly or implicitly made as a term or condition of employment, or
  • Submission to or rejection of such conduct is used as the basis for employment decisions.

2. Hostile work environment. In this case, sexual harassment conduct makes the workplace intimidating, hostile or offensive to the point where it unreasonably interferes with an employee’s work performance.

In considering whether or not an environment is “hostile,” the courts will weigh several factors, including:

  • Whether the conduct was verbal, physical or both,
  • How frequently the conduct occurred,
  • Whether the conduct was hostile or patently offensive,
  • Whether the alleged offender was a coworker or supervisor,
  • Whether others joined in the harassment, and
  • Whether the harassment was directed at more than one individual.

Timing of a Claim

According to the EEOC, a hostile environment generally doesn’t result from a single incident or a few isolated incidents, unless the conduct is egregious. But a claim of sexual harassment is bolstered if the complaint is made soon after the event, even if it’s made after the worker quits or is fired.

Despite the distinctions between these two types of harassment, neither term is found in either Title VII or its regulations. It’s up to the EEOC to establish if there are grounds for a claim.

It’s a Woman’s (and a Man’s) World

Sexual harassment charges typically involve complaints by a female worker about a male coworker or supervisor.

However, as this case shows, sexual harassment may cross gender and sexual orientation lines. According to the Equal Employment Opportunity Commission (EEOC), both the victim and the harasser can be either a woman or a man and the victim and harasser can be the same sex.

Although there are no exact statistics on the number of men being sexually harassed at work by women or how many actually file claims for sexual harassment, it’s likely that the cases filed with the EEOC represent a fraction of the total number of incidents. Some men may choose not to report sexual harassment or file a claim with the EEOC because they’re embarrassed or afraid of being subject to ridicule.

Nevertheless, claims by males clearly are on the rise. The EEOC reports that

92% of all claims in 1990 were filed by women as opposed to 83% in 2015, representing a 9% increase in claims filed by men in 25 years.


Posted on Jul 25, 2017

The Family and Medical Leave Act (FMLA) is often tweaked, adjusted or reinterpreted as cases of alleged abuse continue to pop up and courts are asked to weigh in. With so much change, it’s a good idea to check your policies regularly. Is your company in compliance?

Here’s a very streamlined recap of the top 10 FMLA fundamentals to refresh your memory. (Keep in mind that your state and local laws may have stricter requirements.)

1. Allowable purposes for unpaid leave up to 12 weeks: Attending to the birth or adoption of a child, caring for a family member with a serious health condition, or suffering a health condition that prevents one from performing essential  job tasks. (Special rules apply where family members are on active duty in the military.)

2. To be eligible, employees must: Have logged at least 1,250 hours of service during the period before the leave, and have worked for the employer for one year over a period no greater than seven years (that is, employment gaps are permissible).

3. Private sector employers are exempt from the FMLA if: They have fewer than 50 employees overall or at a specific site that’s at least 75 miles away from any of its other employment sites.

4. When taken, the FMLA leave period: Doesn’t have to be a single block of time consisting of consecutive days; intermittent leave may be possible, as well as working on a reduced schedule basis. When leave is intermittent in a nonemergency situation, employees should make a “reasonable effort” to accommodate the operational scheduling needs of the employer.

5. Maintenance of benefits: Employees out on FMLA leave must stay on the employer’s health plan under the same terms (including cost-sharing provisions) as before.

6. Coordination with paid leave benefits: Often it’s possible for employers to require employees taking FMLA leave to use up accrued paid leave time concurrently.

7. When requesting an FMLA-mandated leave, employees must: Give employers a 30-day notice, if the need for the leave was foreseeable, or otherwise as soon as possible. When making an FMLA leave request for the first time, employees don’t need to state that the request is being made under the FMLA. They merely need to provide employers enough information about the purpose of the leave for the employer to independently determine that the leave is sanctioned by the law.

8. Notification requirements: Employers must maintain posted notices about the FMLA; include information about it in their employee handbooks; and, upon request, provide information about employees’ rights and responsibilities under the law.

9. Medical certification: When a leave request is based on a serious medical condition of the employee or the employee’s family member, the employer can request documentation from a health care provider, as well as seek second and third opinions.

10. Job restoration: When employees return from their leave periods, they must be given their original jobs or another position with equivalent pay, benefits, and other employment terms and conditions.

Legal Authority

In an FMLA case, only a U.S. Supreme Court decision can affect the law nationwide. Still, a lower court ruling — even if it occurs in a jurisdiction other than your own — might be influential where you’re located. Below are three noteworthy cases that highlight the need to keep abreast of FMLA legal developments:

Case 1. The court upheld an employer’s decision to terminate an employee while she was on FMLA leave, against the employee’s claim that her termination violated her FMLA rights and was discriminatory. The court accepted the employer’s explanation that it had a sound business rationale to eliminate the employee’s position: The company was shrinking; other employees could assume her duties, and it would have made the same decision if the employee weren’t on leave.

Case 2. The court agreed with an employee’s argument that she was being prevented from gaining the full benefit of her FMLA leave because of her employer’s pattern of making substantial requests of her time while on leave. The court held that it was permissible for the employer to contact employees on leave for certain tasks. Examples include:

  • Passing along relevant institutional knowledge to new staff,
  • Providing computer passwords,
  • Giving closure on complicated assignments, and
  • Identifying other employees who could fill the void created by her absence.

But it was inappropriate for the employer to contact the employee regularly with questions about her work duties and absences, inputting data, and taking time out to receive training before returning to work. The fact that the employee was terminated shortly after her return to work buttressed her argument that her employer was trying to interfere with her rights.

Case 3. The Ninth Circuit Court of Appeals upheld a lower court ruling in favor of an employer that terminated an employee who claimed her FMLA leave benefits were denied. The employee had requested, and received, a period of leave to care for her sick father. But she’d requested that it not be treated as FMLA leave, but instead as ordinary paid leave. The company agreed.

However, the employee didn’t return to work until two weeks after the date she’d promised to come back and was terminated. She argued that the extra two weeks should have been treated as protected FMLA leave, because her reason for remaining away from work was to care for an ailing family member. The courts drew two conclusions: 1) It’s possible for an employee to seek and receive non-FMLA leave for an FMLA-eligible purpose, and 2) Unauthorized leave cannot automatically become protected FMLA leave without the employee explicitly requesting it on that basis.

Regular Tune-Ups Advised

New FMLA cases are decided all the time, creating a demand for attorneys who specialize in this corner of the law. Therefore, given the fluidity of FMLA legal interpretation, it’s prudent to periodically review your compliance with the evolving legal standards.

Posted on Jul 12, 2017

Organizations that advocate for paid parental leave recognize that for most employers, the decision of whether to offer that benefit will be rooted in economics. In a competitive environment, it’s a rare employer that can afford to add to personnel costs without a bottom line-based rationale.

The motivation of employers in California, New Jersey, Rhode Island, New York and the District of Colombia, includes obeying state law. However, in some of those states, the compensation employees receive while on leave may be less than the full amount of their earnings, and is funded by a state-run insurance system that employees fund via mandatory payroll-deducted premiums.

What’s the outlook for paid parental leave? Based on a recent survey by the Society for Human Resource Management (SHRM), dealing with employer-paid family leave practices, growth appears to be on the horizon. SHRM’s analysis includes this prediction: “A competitive labor market may prompt more organizations to adopt robust, paid parental-leave policies in order to attract needed workers.”

Industry Variation

SHRM’s research shows that 18% of U.S. employers offer paid maternity leave, and 12% also offer paid paternity leave. Paid parental leave is most common in the technology sector, where competition for talent is intense. 

Research by WorldatWork, another professional membership group, delved into the same topic in 2016. Assessing the prevalence of paid parental leave policies is tricky because companies often don’t distinguish between paid family leave benefits, and paid leave earmarked specifically for new parents. Below are some of the findings.

Among companies that do offer paid leave to new parents as a separate benefit from their overall paid family leave policy:

  • More than half limit the time period to six weeks or less,
  • More than one-third make employees eligible to receive it immediately upon being hired,
  • Less than half have a one-year waiting period, and
  • The largest segment, about one half, requires new parents to use the benefit within the first year of parenthood, while just over one-third have a six-month deadline.

Potential Benefits

According to a report compiled by the National Partnership for Women and Families, employers that offer paid leave plans may enjoy many benefits as a result, some of which are listed below.

Paid leave:

  • Improves worker retention, reducing turnover costs. First-time mothers who take paid leave are more likely to return to the same employer than to an employer who doesn’t offer paid leave,
  •  Increases worker productivity, according to survey data from California employers, where paid family leave is mandatory,
  •  Boosts employee loyalty and morale,
  •  Helps put smaller employers in a position to compete with larger employers, and
  •  Heightens competitiveness in the global economy for American businesses. (Most industrialized countries mandate paid family leave.)

These claims are general, so assessing the potential benefits of having a paid leave plan in your workplace will require some analysis on your own part. Here are some questions suggested by SHRM to help with such an evaluation.

1. Which job categories or demographic segments of your workforce are most vital to your success? For example, you may find that the group you most rely on is composed of younger employees who are more likely to need paid parental leave.

2. What motivates the workers who are most vital to your success? It’s possible that the employees who are most likely to take advantage of paid parental leave would place a higher value on some other form of compensation, such as more generous paid vacations.

3. What’s the competitive landscape in your labor market? If you’re not having a turnover problem or if your competitors aren’t offering paid family leave, you may not feel compelled to consider it.

4. What’s your overall employment strategy and workplace culture? If your primary employment value proposition is, for example, schedule and career flexibility and a “family friendly” culture, paid family leave would be a natural fit.

5. Crunch the numbers. While it’s impossible to project with precision the cost in “extra” wages and financial payoff that’s involved in reduced employee turnover and higher productivity levels, you’ll need to give it a shot. If you move forward with a paid family leave policy, after you have accumulated some history, you will be able to verify or correct the preliminary conclusions you have drawn.

Going Forward

Will paid maternity and related family leave benefits become more commonplace, as often predicted? The answer will depend on the conclusions employers draw as they consider these and other questions and factors beyond their control, including the future strength of the economy and birth rate trends.