As I continue to reflect this week on nine years of blogging, it’s hard to recall that I started this before the Great Recession hit.  Since that time, all businesses have become more cost-conscious and creative in how they are structured and how they compensate their employees.  Non-profit organizations are no exception to that.  But how can these workplaces continue to “do good” while rewarding their employees?

Today, I’m pleased to share this post from Marc Kroll, Managing Partner at Comp360 LLC.  Marc talks total about how non-profits can implement a “Total Rewards” strategy and earn a return on their investment. 

And what is “Total Rewards”? As the Houston Chronicle described it in a recent article: “Formerly referred to as simply compensation and benefits, total rewards takes on a more creative and broad definition of the ways employees receive compensation, benefits, perks and other valuable options. Total rewards include everything the employee perceives to be of value resulting from the employment relationship.”

Having a well-thought out compensation system is a key component to reducing liability and, hopefully, ensuring happy, productive employees.  If you’re looking for ways to avoid dealing with employment lawyers on issues, getting ahead of issues like this is a natural step in the right direction.  My thanks to Marc for his insights.  

Kroll_MarcAs a result of the slow growth economy, non-profit organizations are facing decreased funding due to federal and states’ fiscal deficits as well as a significant shift with grant-makers who are increasingly funding awards on a performance/return on investment basis.  In addition, the soaring costs of healthcare insurance are adding significant pressure to operating costs.

Without new revenue growth, many non-profits are looking for ways to measure and increase the value/return on their social mission and investments.

Consistent with these changes, some non-profits are responding by trying to increase the “return” on their services and programs in terms of program execution, utilization, and measurable results.  Given this environment, non-profits are being forced to examine the viability of their highest cost centers, most particularly, employee compensation and benefits for value against performance as well as market competitiveness.

Non-profit Boards and senior management are questioning what the appropriate compensation and benefit programs should be, at what levels they should be funded, and how to drive accountability and performance in the employee workforce.

While non-profit organizations have predominantly been about social service and charity with their cultures reflecting a “do-good” environment and a concern for employee welfare, present conditions have forced many to consider a culture shift toward performance and accountability as well as changes in their Total Rewards programs.  This delicate balancing act between affordability and the ability to attract and retain a stable and talented workforce presents challenges in nonprofits’ capacity to assure effective organizational culture, management practices, labor market relevance, and strategic/operational priorities.

To help navigate this challenge, the following insights to six key questions provide a prescription for change in Total Rewards:

  1. What should your Total Rewards strategy be?

This is a statement developed by your Board or management committee on how the organization’s compensation and benefits programs will support and relate to your operational objectives, culture, management practices, and employee performance.  It also describes both the labor market within which the organization wishes to compete and the level at which both compensation and benefit programs will be set and funded.

Continue Reading Guest Post: Getting The Most Out of Employees At Non-Profit Organizations – A “Total Rewards” Strategy

franklinUp on Fortune magazine’s column “Practically Speaking” is the following question:

Frank has been with us for more than 20 years. He works in the warehouse and has done a good job for us. I like him. But, to be honest, for the work he performs I could easily replace him someone younger and … cheaper. Would it be wrong to let him go?

Well, what a loaded question.  The advice column side-steps an important issue and gets into a discussion regarding overhead, benefits, etc.

If you follow this path blindly, you may walk right into a lawsuit.

Why? Because discrimination laws prohibit discrimination on the basis of age and you’re already acknowledging that you want someone “younger” — even if salary considerations may also be involved.

In fact, there have already been cases that talk about similar scenarios. In one case, a supervisor told an employee that he was “looking for younger single people” and that, as a consequence, the employee “wouldn’t be happy [at the company] in the future.”  In other cases, comments about replacing workers with “younger, cheaper” ones can also be used to support an age discrimination claim.

Even without the comment, a replacement by an employer of an employee with someone significantly younger can give rise to an inference of age discrimination.

So, case closed?

Well, maybe in this instance, since the employer already has this “younger” notion embedded in its decision-making process.

But suppose the employer is looking to cut costs and wants to replace higher salaried workers with cheaper ones: Can it do that?

Well, after the court’s decision in Gross (which I discussed way back here): Maybe.  The court there held that age must be the decisive factor in the employer’s decision and that “but for” the employee’s age, the employer would not have made the same decision.

Thus, an employer who believes it can get the same work done by an someone at a lower salary may sometimes survive an age discrimination claim — so long as age doesn’t factor into the decision.  But before you do this, be sure to consult with legal counsel as it’s a minefield to navigate.  This is particularly true in Connecticut where it remains to be seen how closely the courts will truly follow federal law in this instance.

And one more note:  Terminating employees to avoid further pension obligations or other benefits is likely illegal in many instances under federal law.  The Older Workers Benefit Protection Act (OWBPA), which we often think of as only applying to separation agreements, also made it illegal for employers to use an employee’s age as the basis for discrimination in benefits, and to target older workers for their staff cutting programs on the basis that benefits were too costly.

Cost considerations are certainly important for companies to consider. But tying those considerations to age is a step too far under the law.   Be sure to understand the distinctions. And try not to blindly follow advice columns (or even blog posts!); each circumstance is different and getting appropriate legal advice in this instance really is critical.

One day, your human resources manager comes to you.  She tells you that an employee lost his commercial driver’s license because he was caught — off the job — driving drunk.

The driver’s license is a requirement for the employee’s job.  Can you fire the employee? Under virtually all circumstances, sure.

But then the employee files for unemployment compensation.  Can he collect?

The Connecticut Supreme Court, in a decision that will be officially released next week, says yes — at least given the facts of this particular case.  The court acknowledges it might come to a different decision if the employee had been caught during a testing program mandated by the employer.

I talked about the case and the implications for employers with WNPR’s Jeff Cohen yesterday and he provides as good a summary as anything.

Hopefully, the legislature will fix this seeming inconsistency in the law in the next term.

 

As we enter a holiday weekend, my colleague, Mick Lavelle uncovered an odd circumstance of unemployment compensation law.  He discusses it below. Have a great holiday weekend.

The old adage that crime does not pay has been slightly modified by the Connecticut Department of Labor, Employment Security Division, which administers unemployment compensation benefits.

Unemployment compensation is paid by the State to people who lose their jobs, unless they are disqualified for benefits.

Voluntarily quitting is a disqualification, as are various types of bad conduct listed in the unemployment compensation statutes [Conn. Gen. Stat. 31-236], such as larceny of currency, willful misconduct, knowing violations of reasonable rules, and “larceny of property or service, the value of which exceeds $25.”

You might think that some of these disqualifiers would overlap.

For example, stealing property, even of less than $25 in value, would undoubtedly be willful misconduct, and would also violate a reasonable rule in most if not all workplaces that theft from the company is grounds for discharge.

But in a ruling dating from 1997, the Unemployment Security Division Board of Review decided that the statutory reasons for disqualification should be read in the disjunctive, a legal term meaning mutually exclusive alternatives. The Board reasoned that larceny was a disqualifier exclusive of other misconduct, but that when property or services were taken instead of cash, the Legislature had permitted disqualification only if the value exceeded $25.

In other words, if an employee stole $20 worth of goods and was fired, he committed larceny, so that he could not be disqualified under another type of misconduct. But he didn’t steal more than $25 worth of property, so he couldn’t be disqualified under the larceny category either. In short, he could steal up to $25 of property and still collect unemployment compensation benefits.

Perhaps in this instance, the new adage is that petty crime sort of pays.

It’s rare for a case from Connecticut to make it all the way to the United States Supreme Court. But this week, a case did just that.

I’ve previously discussed the case of Cigna v. Amara in many posts which you can read here.  The case ultimately concerns the receipt of retirement benefits and whether documents about those benefits were misleading. But the narrower issue the court is now deciding concerns the type of proof and allegations that need to be presented in a class action of this type and what remedies are available. 

The American Bar Association has prepared a summary of the case and has summed up the issue that the court is to decide:

Must participants who are members of a class action suit prove detrimental reliance on an inaccurate summary plan description in order to receive a remedy under ERISA, or is the mere proof of “likely harm” enough to justify equitable relief?

Oral argument from that case is now available online.  A decision is expected sometime this spring. 

For those involved deeply with ERISA issues, it’s definitely worth a read.  There was an interesting back-and-forth discussion about what should happen when a summary plan description conflicts with the underlying plan documents.  Indeed, as noted in the argument, CIGNA conceded that its summary plan descriptions were deficient. But the issue, according to CIGNA, is what is the proper remedy:

My point I guess in this is that, yes, Justice Kagan, the statute requires the SPD to contain certain information.  We accept the fact of the conclusions of the court below in this case that they did not do so. There are two SPDs. They failed to live up to the requirements of ERISA. There is a remedy for that.

For everyone else, keep an eye on this case. It may provide some guidance to employers about how to oversee some plan issues when the case is decided next year. 

(Note: See a prior post for my familiarity with one of the class representatives. I have no involvement whatsoever in the case.) 

UPDATED

This week, both the Hartford Courant and the Hartford Business Journal,  have run lengthy articles suggesting that the COBRA subsidy — which went into effect in February of this year — is coming to end for most workers. 

Unfortunately, the articles miss the big picture of the law and, in doing so, add to the confusion surrounding the law.

So, let’s take a moment to understand the context.

Before February 2009, laid off workers who wished to continue their health benefits had an option to do so but typically by paying the full amount of the premiums. They could do so under the law known as COBRA.

Then in February 2009, Congress passed a law that provided that workers laid off between September 1, 2008 and December 31, 2009, would be eligible to receive a subsidy from the government, in which the government would pay 65 percent of the premium for a nine month period.  This is what’s been known as the "COBRA Subsidy".

So, this month, some workers who were laid off between September 1, 2008 and March 1, 2009 and who had been receiving this subsidy from the government, will lose that subsidy.  They will not lose their insurance; rather, they will revert to the existing COBRA law for coverage.

Nevertheless, the articles suggest that the benefits are ending for other laid off employees as well. That is not the case. Anyone who is laid-off through the end of 2009 may still be eligible to receive the nine-months of subsidies (and employers will still be responsible for processing such requests) so long as their are COBRA-eligible. At the end of each nine-month period, they can continue their health insurance benefits at the full premium rates.  The DOL has issued FAQ on the subject which you can find here.

[Note that if an laid off employee still has health insurance coverage through, say January 31, 2010 under an existing policy of the employer, then COBRA would not start until that time and the laid off employee would not be eligible for the subsidy.]

It is unclear, at this point, whether Congress will extend this subsidy any further. A bill has been introduced to do so but its prospects remain foggy.

What’s also unclear is how many individuals are actually using the COBRA subsidy.  An estimate before the bill suggested that up to 7 million people would be eligible, but the numbers on the actual amount of people using the subsidy have yet to be released by the government.  

For employers, absent passage of another extension, the next several months are likely to be another confusing time. 

Employees who were laid off before December 31, 2009 and who are otherwise COBRA-eligible may continue getting the subsidy, but those laid off after December 31, 2009 (or those who are not COBRA-eligible until after December 31, 2009) will not.  As such, employers will need to amend their COBRA notices and forms yet again to revert back to the former forms that they used before the subsidy.

Leave it to librarians to come up with a great new resource page for learning about Connecticut’s unemployment laws.

I can hear the chuckles now. Librarians? 

Yes, librarians.

As long-time readers of the blog know, one of the best kept secret resources for attorneys and businesses are the judicial branch law libraries.  They continue to serve as a clearinghouse for lots of information that is scattered among the Internet.

The librarians latest creation is a pathfinder page on the state’s unemployment compensation laws.   Among the items of information: various resource guides from the Connecticut Department of Labor and Office of Legislative Research; links to the relevant Connecticut statutes and regulations; library materials; and useful websites.  It’s a great place to start research on the subject.

The pathfinder isn’t perfect. For example, although it links to documents helping to explain what an employee’s rights are, it doesn’t link to the DOL’s "The Employer’s Guide to Unemployment Compensation" — a must read for employers who are addressing the issue of unemployment compensation. 

The Connecticut Department of Labor also has additional information helpful to employers on its website (that isn’t listed on the pathfinder), including information on: Eligibility Requirements, Quality Control Brochure for Employers, Rapid Response Information Packet, Shared Work Program (as alternate to layoffs).

So, while the judicial branch law libraries have provided a great resource to start looking at the unemployment compensation issue, employers should also be aware of other resources out there. But it is a better place to start research than a Google search.  

The Employee Benefits blog has a terrific post this week explaining the "Gross Misconduct" rule for COBRA Coverage.

For those unfamiliar with the lingo, The Consolidated Omnibus Budget Reconciliation Act (COBRA) (among other aspects) describes rights that employees have to continue their health insurance after their employment as been terminated (and for some other reasons too).    But there is an exception: When the employee is terminated for "gross misconduct", the benefits cease.  What does that mean? Well, the Act doesn’t define it.COBRA - Not cobra kai from Karate Kid

But the Employee Benefit blog shares some insight from one case about what it means. 

Three things are very important about this decision.  First, the court did not find that any “criminal” conduct was required to meet the “gross misconduct” definition.  Gross misconduct can be an intentional, deliberate, extreme and outrageous that “shocks the conscience.”  It can be “reckless or in deliberate indifference to an employer’s interests.”  …

Second, the employer has the burden of establishing the termination was for “gross misconduct.”  … It must be the primary reason, not one of many.

Finally, the employee and potential COBRA beneficiaries have to be notified of the determination that COBRA is not being offered because of the termination for gross misconduct.  

So what’s an employer to do? The blog suggests some thoughts, but I’ll share some general observations as well.

1. Document, document, document.  If an employer is going to claim "gross misconduct", there ought to be ample documentation supporting the decision.

2. Make sure the termination documents reflect the actual reason and the reason amounts to "gross misconduct".  Meeting this standard is difficult and courts will understandably look to any reason to deny it. Having a letter of termination that merely states the employee was let go for "performance" reasons, isn’t going to cut it. 

3. Follow policies and COBRA to the letter. The requirements, for example, about notification under COBRA are strict. Missing deadlines or not providing information may provide the escape hatch that might not be available otherwise.

And as always, seek some legal guidance on this. Denying COBRA nowadays is rare; if an employer does try to use that provision, it can be assured that a fight about coverage may not be too far behind.

A few posts this week caught my eye:

  • First, the HR Carnival has a great post this week about various HR issues, including how to train managers better.  And, best yet, you’ll find a link back to this blog.  Thanks to the writers of the Carnival for the reference.
  • Kris Dunn, over at HR Captialist,  has an interesting post about how HR professionals can help their companies keep benefit costs down. As Kris says, "If You Don’t Have a Meaningful Answer to this Question From Your CEO, Update Your Resume…"
  • Evil HR Lady, has an informative post as to how employers can prepare for terminations and how to educate managers about the right ways to do so.
  • Workplace Horizons has been right on top of the Congress’ consideration of ENDA, the Employment Non-Discrimination Act.  Near daily updates about the rumors of various amendments have been going up and its a useful site to keep track of certain pieces of legislation. 
  • And finally, The Employment Blawg has been posting a series of hypotheticals on different workplace situations including violence, workplace and overtime.  As stated on the blog "Read Trucks and Guns: An Employment Law Fable, Part I (Overtime for Truck Drivers) for the whole story. . . . It ends with an HR manager getting shot by the driver (just hypothetically)."