The SESCO Report – July 2008


U.S. Supreme Court's Retaliation Rulings Land on Side of Employees

Last month, the U.S. Supreme Court made back-to-back decisions that allow employees to file retaliation claims under two laws that do not expressly state this right. In doing so, the Court opened the door for more employees to claim retaliation. Two years ago, the Court broadened employees' rights to file retaliation claims under Title VII. With rulings like these, employers have great incentive to make writing and enforcing anti-retaliation policies a priority.

On May 27, the Supreme Court determined that federal employees may assert a retaliation claim under the Age Discrimination in Employment Act (ADEA). The right of private employees to file retaliation claims was written into the Act; the provisions of the ADEA related to public employers, enacted seven years later, broadly provide a prohibition against "discrimination based on age," but do not explicitly mention retaliation. The High Court ruled 6-3 that the phrase "discrimination based on age" includes retaliation based on the filing of an age discrimination complaint. (Gomez-Perez v. Potter, No. 06-1321)

The Supreme Court also decided that Section 1981 of the Civil Rights Act of 1866, which is a post-Civil War statute that gives "[a]II persons...the same right...to make and enforce contracts...as is enjoyed by white persons," encompasses retaliation complaints. (CBOCS West, Inc. v. Humphries, No. 06-1431) Bad news for small businesses: Those that have fewer than 15 employees and do not fall under Title VII are subject to Section 1981, which applies to all employers. More bad news for employers: Section 1981, unlike Title VII, does not place a cap on damages.

In 2006, the Supreme Court ruled that employees could have a valid retaliation claim even if they do not experience an economic loss or ultimate employment decision, such as termination or demotion. In this case, a job transfer and a 37-day unpaid suspension, for which the employee eventually received back pay, were deemed illegal employment actions because they could discourage an employee from bringing discrimination charges. (Burlington Northern & Santa Fe Railway Co. v. White, No. 05-259)

With the Supreme Court taking a broad stance on employment retaliation, employers should take the following steps after an employee has filed a discrimination, harassment, or safety complaint in order to protect the company from the additional threat of a retaliation charge.

? Avoid knee-jerk reactions. An aggressive reaction to a complaint could be seen as retaliatory in nature. Treat complaints as an opportunity to correct mistakes and avoid liability, and not to automatically consider the employee as a troublemaker.

? Prevent further incidents of mistreatment. You must be evenhanded when separating employees who are at odds. Be careful not to penalize the complainant.

? Implement your organization's system for receiving and investigating complaints.

? Keep the investigation focused on the complaint, and avoid getting sidetracked by the complainant's performance. Even if your investigation reveals shortcomings in the employee's performance, keep the investigation centered on the allegations at hand. Deal with the performance problems separately.

? Orally review the entire complaint and your organization's retaliation policies with employees and subordinates when a complaint is filed, when an investigation is concluded, and as often as needed in between.

? Don't punish an employee who files an unfounded complaint or grievance. Remember that even if an employee's complaint is groundless, if it was filed in good faith, he/she could still be protected against retaliation.


Soaring Fuel Prices Bring Changes in the Workplace

Escalating gas prices are prodding businesses and government organizations to take drastic steps to curb costs. Not only are businesses hurt by high energy costs but employees are hurting as well, and companies are responding in several ways:

? Compressed work schedules ? Many are cutting back to four-day workweeks, with employees generally working four 10-hour days instead of five 8-hour days. It's a sign of how deeply gas prices are cutting into employees' pay. Full week coverage can be maintained with some employees working Monday through Thursday and others working a Tuesday through Friday schedule. The last time four-day workweeks came into vogue was during the gas run-up on the 1970s.

Beyond the energy and financial implications, the shortened workweek is a quality-of-life issue for many employees, as they are able to spend more time with their family.

? Four-day weeks ? Some employers that can manage it are moving to shut down for one day. For one day a week, vehicles used for work can sit idle or air conditioning can be kept off. This summer Utah will become the first state to institute a mandatory four-day workweek for most state government employees. The change is effective on August 4 and will affect about 80% of Utah's state workforce. Public universities, the state court system, prisons, and other critical services are exempt from the four-day schedule.

? Telecommuting ? Working from home is another option to reduce costs for both the employee and the employer. Obviously, not all kinds of work can be performed from home, and certain parameters must be agreed to by employees and the employer to make this arrangement work.

? Car pooling ? With gas prices rising, more employees are finding ways to car pool with their co-workers.

? Gas cards ? Employee recognition programs often provide cash awards for employees. Some employers are now providing gas cards to employees as part of their recognition program.

It is reasonable to assume that energy costs will remain relatively high in the long term. Employers and their employees will continue to seek innovative ways to deal with this issue.


Termination Pay ? What and When to Pay Terminating Employees

As SESCO consultants are assisting in helping clients separate employees, one of the most common questions we receive is, "Do we have to pay earned, unused vacation or PTO?"

Unfortunately, answering this question is getting more complicated by the day as this is a state law driven issue as federal Wage and Hour and compensation laws do not address fringe benefits for the most part.

Many states do not address vacation pay upon termination or dictate the timing of final pay. Some states come right out and say that upon termination employers must pay for earned, unused vacation. Most states take a middle ground in that they include vacation as part of "wages" and subsequently state that wages must be paid to employees upon termination. This allows for interpretation and typically falls back on the employer's policy or practice.

In reducing your liability, SESCO strongly suggests that your employee handbook policies be customized to reflect state employment regulations. Your SESCO consultant will review your employee handbook in its entirety to determine compliance with not only federal employment regulation but state regulations as well. SESCO retainer clients can contact SESCO for a free review of the organization's employee handbook.

Contact SESCO to discuss specific state laws regarding termination pay including what must be included in the final paycheck as well as the timing of that final paycheck.


Skyrocketing Insurance Costs

Although only 3% of U.S. organizations have considered eliminating healthcare coverage for their employees, 75% have changed their healthcare plan design in large part to the unmanageable cost increases in recent years.

Healthcare costs have increased by double digit percentages year after year forcing employers to grapple with the consequences. Employers know the value of offering healthcare which is typically a powerful recruitment and retention tool and is an important measure to maintain a healthy workforce. However, most employees do not understand the value and many X and Y generation employees have come to expect health insurance as a "right" ? this obviously creates an opportunity for employers and that is continually educating employees on their benefits to include plan design, offerings, customer service and most importantly, the cost of offering employee benefits through customized employee benefit statements, of which SESCO produces for clients.

Additionally, overwhelming cost is the number one factor in evaluating healthcare plans with 93% of organizations using cost as a prime piece of data in healthcare evaluation. However, SESCO finds it interesting that when we recommend to clients that they need to "shop" their benefits, most organizations do not want to take the time or trust that their agent is providing the best possible product. Relationships between employers and agents are important; however, with the rising cost, employers must challenge alternative plans and this means asking other agencies to quote the plan. If you request that your current agent look at options, you will find that very rarely, if ever, does the agent create an optional plan which is less expensive. Therefore, owners and entrepreneurs must demand that their staff shop health insurance annually and that means requiring three different insurance agencies to shop the plan. You may be surprised as there are significant commissions built into agency and agents providing flexibility.

Other trends include implementing preventative measures to curtail healthcare costs. These include:

Wellness programs
Forcing spouses off the existing plan if they have access to health insurance at their employer
Implementing EAPs to promote health lifestyles
Employers paying for club memberships and smoking cessation classes
Developing a corporate relationship with firms such as Weight Watchers — who will come in weekly and/or monthly — in essence developing a company Weight Watchers program
Creating wellness teams and promoting their activities such as walking clubs
Employers continually challenging HSAs or flexible spending accounts

These measures may help stem the tide of rising costs. In the least, ensure your employees understand the cost through hidden paychecks. Call SESCO to discuss customizing hidden paychecks for your company.

SESCO Client Inquiry ? Staff Response

Question: We are considering hiring students to work this summer. What sorts of things do we need to take into account?

Answer: Generally speaking, minors under the age of 14 should not be employed by private, non-agricultural businesses. States usually regulate the time of work and the maximum hours of work for minors under the age of 16. Minors are normally guaranteed an unpaid meal period after a certain number of continuous hours worked. You may be required to get a work certificate or an age certificate. Minors under 18 are not allowed to perform certain jobs that are considered hazardous in nature. Finally, employers are required to post child labor notices and keep an accurate account of the minor's daily time worked to include unpaid meal periods. It is recommended that you check on the specifics of child labor regulations in your state prior to hiring persons under the age of 18.

Welcome New SESCO Clients!

? Bristol Home Health
? Renshaw Automotive Group
? Dutt & Wagner of Virginia
? Hyundai of Morristown
? Wise County Redevelopment & Housing Authority
? Smyth-Bland Regional Library
? Tennessee Primary Care Association
? Blue Ridge Medical Center
? Mid-Atlantic Broadband Cooperative
? Hapco
? Moser Funeral Home
? Animal Dental Clinic
? Commodore Sales
? Pulaski County Public Library
? Home Health Solutions
? Premiere Fibers, Inc.
? Little & Adams
? Sea Pines Country Club

SESCO Client Feedback

"It has been a little over a year and I wanted to send a note of thanks for your help. I have gone from, "I can't do this," to "What have I done?," to "This is not so bad." To know that you are only a call away has been and will continue to be a great help and comfort to me. Thank you for your help."

~ Angela Bencene
Mountain Empire Oil Company


Special Insert — Reduction in Force Staff Recommendations

Unemployment is at 5.5% which is, frankly, a very strong unemployment indicator. In some industries the economy is fragile as shaken by housing, credit and financial industry debacles. These issues and rising fuel prices have made employees and businesses more cautious in their spending and investment, which restrains overall economic activity, subsequently placing businesses into making tough business decisions such as reducing expenses.

Businesses will explore various measures for cost reductions. Some of the measures to be considered include soliciting cost reduction ideas from employees, a hiring freeze, and a shortened workweek. Depending upon the nature of the business, a temporary shutdown may be an option. However, with the current economic concerns affecting many industries and businesses, the reality is that many may need to reduce their workforce and layoff employees. Expenses must be controlled and compensation is normally an employer's largest single controllable cost.

When considering a Reduction In Force (RIF), a company should be able to respond effectively to the following questions:

? Why is the RIF necessary and what documented justifications does the company have for their RIF?

? How will employees be selected for the RIF?

? How will the company treat employees subject to the RIF?

To assist companies in planning and preparing for RIF's, SESCO has authored a Complete Guide to Reduction In Force and Layoffs to include checklists, policies and forms to thoroughly document the process, as well as recommended severance agreements and releases for those who are retiring and/or laid off. SESCO provides this resource publication to retainer clients at no charge. Also, it is strongly suggested that clients of SESCO considering reductions in force contact their consultant or Phil Richards, Director of Client Services, to discuss the process to not only ensure you avoid any potential liability, but also handle the process in such a way that the effects on employees retained as well as customers are lessened.

To reduce the level of risk associated with RIF's, there are a number of precautions a company can take in selecting employees. The following is a brief summary relative to the selection process:

? Determine the decision-makers ? Selections should be made by more than one (1) person. In particular, senior management and/or human resource personnel should make selections with the input of individuals who have personal knowledge of an employee's performance within the company. Additionally, department supervisors or managers are also best able to assess past performance and predict future performance and should be included in the process.

? Evaluate employees ? It is essential to build solid and well-documented cases for individual decisions. It is generally not a good idea to rely solely on past performance evaluations because these evaluations often are written in highly complimentary terms and are not necessarily accurate or designed for comparing employees with respect to the skills, knowledge or abilities required for a RIF. It is more appropriate to prepare special rating assessments. These rating sheets are included in SESCO's layoff recommendations guide and can be obtained by contacting SESCO. All ratings should be reviewed for thoroughness, consistency within the organization, and consistency with previous performance documentation.

? Analyze and adjust selections ? Once the preliminary selection process is completed, it is recommended that management review the proposed list of employees selected for the layoff, relocation or varying levels of benefits and conduct a Disparate Impact Analysis regarding potential claims of discrimination such as a disproportionate number of protected employees were chosen (over 40, minority, female, etc.). Adjustments may need to be made based upon the make up and analysis of the workforce.

Other employment issues that need to be considered:

? WARN Act ? Worker Adjustment and Retraining Notification Act ? This federal law applies to any business enterprise that employs 100 or more employees or 100 or more employees, including part-time employees who in aggregate work at least 4,000 straight-time hours a week. The Act requires advance notices to employees if the RIF or mass layoff affects at least 33% of the active employees excluding part-time and at least 50 employees, excluding part-time employees.

? Other compliance issues or concerns that need to be considered include state layoff or reduction of force regulations, ERISA, COBRA and unemployment regulations.

Again, if your organization is considering a reduction of force or layoff, please contact SESCO to ensure that the process is properly managed and that you comply with all federal and state employment regulations.