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Professional Service Agreement

The SESCO Report – November 2008

Employers Must Prepare for "Change"

Business and industry must begin the process of preparing for the "change" as promised by newly-elected Barak Obama and Democrats in the House and Senate. There will be enormous real-world, bottom line challenges and changes to the American workplace.

Several labor and employment law issues that employers must now consider and prepare for include:

? Employee "Free" Choice Act ? We've reported on this proposed legislation previously. As it almost passed in 2007, we fully expect passage of this legislation which, in essence, removes the secret ballot election making it much easier for workers to form unions. It would allow a simple card-check authorization — not a secret ballot election, to authorize a union. This legislation will drastically change the number of employers who will have to deal with unions — - and if you've never had to deal with the threat of unionization or manage in a union environment, we cannot over emphasize the impact that the threat of or unionization can have on the business itself, its employee relations and quality and service to customers.

Other major employment law changes that are likely include:

? Healthcare ? requiring employers to pay for coverage.

? Increased taxation. This increased cost will force businesses to examine staffing levels, compensation and benefit offerings, and pricing structures.

? Make it illegal to discriminate against employees and applicants based upon their sexual orientation expanding Title VII of the Civil Rights Act of 1964.

? Prevent employers from establishing mandatory arbitration agreements with employees.

? Repeal the caps on damages for federal discrimination lawsuits filed under Title VII. Currently, there are "caps" for damages should an employer be found "guilty" of discrimination. Under new federal discrimination laws, these caps would be removed increasing the number of EEOC charges and significantly increasing damages awarded to plaintiffs and their attorneys.

? Extend the statute of limitations for employees and ex-employees to file pay-discrimination lawsuits.

? Hand down penalties to companies that move jobs oversees or offer incentives to keep jobs here.

? Ban the long-term replacement of employees who go on strike for economic reasons. This would allow unions to simply strike and bring an employer to its knees as they will not be able to continue to run the business through hiring replacement workers.

? Increase criminal OSHA penalties for employer safety violations and include the public sector under OSHA coverage.

? Expand FMLA coverage. It is predicted that employers with 25 or more employees will be subject to Family and Medical Leave coverage.

? Provide mandatory sick leave and paid FMLA.

So what should employers do now?

SESCO Recommendations

? Ensure that your human resource systems and practices are audited thoroughly. Do not wait for various laws to be revised or implemented. SESCO's employment law audit provides for a thorough review of a client's compliance to all federal and state employment regulations as applicable. The audit also provides for a thorough review of all current systems and practices to not only ensure effectiveness, but to ensure that if there is "alleged wrongdoing" through unemployment, employment discrimination claims or wrongful termination, that you can successfully defend your practices.

? Ask yourself if there is a void of leadership. If there is, there is a vacuum and this vacuum will be filled very quickly, most likely even before you know it, by a union. And with card check, most employers will not have the time to react. Under a card check, employers will not have the luxury to "campaign" as we've had in the past. Assess your management team and ensure that your management team is providing what employees want and need from their employer so that you remove the need for any outside third party intervention.

Please contact SESCO to discuss these very serious issues facing employers and to schedule an onsite visit with a professional, certified consultant. Those employers who are not "retainer" clients, should contact SESCO immediately to provide ongoing human resource and employee relations consulting support.

Ensuring Success Through Accountability

When SESCO trainers and coaches work with managers and supervisors in developing their skills, one of the most difficult issues that the managers must learn to "overcome" is holding employees accountable. Unfortunately, most managers view performance management, coaching of employees, and behavior management as conflict. Hence, managers typically avoid conflict at all cost and subsequently the employee or work group is not as successful as it could or should be. In fact, avoiding this primary responsibility normally results in lower productivity over a period of time, mediocre behavior, poor morale and an overall culture of lack of responsibility.

Obviously, the manager's role is not to avoid their primary responsibility, but learn to manage in a way that leverages the individual's or group's potential. Managers need to learn to communicate and resolve issues creating positive change.

However, when faced with having to resolve issues, most managers respond in the following two (2) ways:

They ignore it hoping it will go away.

Respond emotionally or irrationally ? they wait and wait until emotions take over.

The following basic bullet points can help managers to effectively manage employee behavior on a daily basis:

Take AIM

Attitude Is the manager's attitude toward the situation and his or her people positive?

Intention Is the manager's intention to find the best possible outcome for all concerned? The manager should always write their intention down before communicating with the employee or work group.

Message Is the manager prepared to express intentions sincerely, both verbally and non-verbally?

Give the Discussion Your Best EFFORT

Explain Sincerely share intentions and encourage others to participate in the discussion.

Find Find common ground regarding job responsibilities, rules and policies or quality standards.

Flexibility The manager should try to be open when possible and ready to consider solutions provided by the employee.

Options Brainstorm potential solutions to resolve the issue that will satisfy all parties.

Resolve Provide a solution that addresses the issue and ensure there is support and understanding.

Take Action End the discussion with a clear understanding of expected future actions, including the "who, what and when."

Managers need to remember that:

It is not about being idealistic; it is about being positive.

It is not about the manager's win; it is about the team winning.

It is not about the words; it is about the sincerity behind the words.

When caught off guard, it is not about jumping in and doing it yourself; it is about stepping back and assessing and managing the situation and the people involved.

In summary, to be successful as a manager, you have no alternative but to manage behavior — your primary responsibility to the organization. Most individuals do not possess the natural "skills" that it takes to lead people. It takes time to develop these skills through self-development and participating in education and training as well as through individual coaching. Most importantly, managers need to practice skills that they have learned on the job and never avoid addressing what appears to be a conflict. If you start with a positive attitude and good intentions, your conversations with individuals and teams will be much more successful creating less stress on yourself. Managers must understand that these two (2) elements are completely within their control and you can't help but succeed in creating positive change for your team, your organization and yourself if these elements are implemented.

SESCO provides management development to ensure highly successful organizations to include: 1) classroom training, 2) train the trainer, 3) online training (visit, 4) individual/management skills assessments and coaching, 5) team building.

SESCO's Professional Development Institute looks forward to assisting you in developing your most valued employees — your leaders and managers.

7 Ways to Keep a Conflict from Escalating

1. Get all the facts and clearly identify the problem.

2. Encourage people to actively participate and provide their opinions. You must have a culture that values two-way communications.

3. Do your best to find a positive in the situation and your people.

4. Be willing to listen and consider all viewpoints, especially those that you have concern with as it will set the basis for the discussion.

5. Where possible, find common ground.

6. Deal with the molehills before they become mountains!

7. Only send and respond to emails that are informational in nature. Don't ever address issues or concerns with an individual or team by email or by phone. Always manage issues in person.

Wage and Hour Number One Employment Issue

SESCO has reported previously that the U.S. Department of Labor announced a record wage recovery for Fiscal Year 2007. The Wage and Hour Division recouped $220,613,703, the largest recovery in history. This amount constitutes a 67% increase since 2001.

"We are proud to be ensuring that workers are paid the wages they are due," said Paul Decamp, Administrator for the Wage and Hour Division. "This record-breaking performance demonstrates the Department's commitment to protecting workers."

Based upon SESCO's experience in representing employers before the Wage and Hour Division, the more common violations/traps for employers include:

? Trap 1 ? Misclassifying non-exempt employees as exempt, especially the Administrative, Computer and Professional exemptions in various industries.

? Trap 2 ? Not knowing what is and isn't considered "work" for the purposes of compensation.

Non-exempt employees must be paid for every hour they work. Employers must monitor:

? Early and late clock-ins and outs and edit time records
? Employees working off the clock
? Employees working through or taking short lunches (less than 30 minutes is paid time)
? Travel time, commuting and overnight travel
? On-call

? Trap 3 ? Not calculating employees' regular rates properly.

In addition to calculating overtime on an employee's hourly rate as established, employers must also pay overtime on additional monies earned such as non-discretionary bonuses, incentives, commissions and spiffs. Note: Most payroll software or outside third party processors do not monitor or ensure compliance with this requirement.

? Trap 4 ? Taking improper pay deductions.

The more common include:

? Shortages
? Uniforms
? Damages
? Education/training
? Fringe benefits such as PTO, vacation or other

? Trap 5 ? Improper or incomplete recordkeeping.

This includes incomplete time records, redundant entries of time, not clocking in and out and other incomplete time recordkeeping practices.

If these regulations were not enough, employers are now having to contend with the legal community. As previously reported by SESCO, plaintiff's attorneys are "trolling" for extremely lucrative back wage opportunities. Under the Wage and Hour Division, most employers are responsible for two (2) years' back wage liability if found in non-compliance. Through state legal action, this two (2) years multiplies to four (4) plus attorney fees for the plaintiff and, of course, the employer's representation.


For example, a recent SESCO employer was found in non-compliance. Wage and Hour found for the employees issuing $68,000 in back wage liability to 16 employees.

However, four (4) employees opted out and obtained legal counsel suing their employer in state court. The court found for the four (4) employees issuing $120,000 to four (4) employees. Additionally, the employer had another $40,000 in attorney fees plus their attorney fees — a $200,000 mistake.

As you can see, the financial liability was exponentially higher with just the four (4) employees. And in each case, these back wages were due immediately.

It behooves employers to ensure that their compensation practices are compliant with federal and state employment regulations to include Wage and Hour regulations. SESCO has long specialized in ensuring compliance, since 1945, and is available to assess your practices to determine compliance with the many federal and state employment regulations. Retainer clients receive this assessment at no charge as part of our Professional Service Agreement. We welcome those other clients who do not retain SESCO through our Professional Service Agreement to contact us for a quote. The Service Agreement provides for:

? Annual compliance visit or substitution of consulting work
? Free review and maintenance of the client's employee handbook on an annual basis
? Unlimited telephone, research, e-mail consulting on a daily or as-needed basis
? The SESCO Report, our monthly newsletter, to be provided to all management personnel as so selected
? Ongoing employment law updates for both federal and state regulations

SESCO becomes a member of your human resource management team providing assistance to senior management. Contact Bill Ford at 423-764-4127.

SESCO Client Inquiry — Staff Response

Question: If we give our employees a Christmas bonus, do we have to include the bonus in calculating overtime pay?
Answer: A bonus which is a gift to employees ? such as at Christmas or on other special occasions-may be excluded from computation of their regular rates and overtime pay under the Fair Labor Standards Act (FLSA). However, the bonus must not be measured by hours worked, production or efficiency, and the bonus must not be paid pursuant to a contract.

The following leeways are permitted with respect to Christmas bonuses or gifts:

The bonus may be paid with such regularity that the employees are led to expect it.

The bonus may vary for different employees on the basis of salary, hourly rate, or length of service.

Christmas and other gift bonuses may not be used as a means of satisfying obligations under the FLSA for overtime pay. Any overtime wages owed to employees must be paid for separately.

SESCO Client Feedback

"Nothing but great comments on your workshops, everyone was well pleased and I heard a lot of positive feedback. Thank you so much for coming and doing that for us. We appreciated it so much." ~ Judy A. Lusk, Worldwide Equipment, Inc.

Special Insert

Amended ADA Has Important Implications for Employers

On September 25, 2008, the President signed the Americans with Disabilities Act Amendments Act of 2008 (ADAAA). Employers with 15 or more employees are required to comply with this federal law. The Act makes important changes to the definition of the term "disability" by rejecting the holdings in several Supreme Court decisions and portions of the EEOC's ADA regulations. The Act expands the protections of the original ADA to include more individuals with less severe impairments, and many experts believe this will result in an increased number of claims of discrimination filed under the ADA. The Act is effective as of January 1, 2009.

The Act retains the ADA's basic definition of a disability as:

Having a physical or mental impairment that substantially limits one or more major life activities;
Having a record of such an impairment; or
Being regarded as having such an impairment.

However, the ADAAA has expanded the definition of "major life activities" to include:

Caring for oneself
Performing manual tasks
Lifting & Bending

The ADAAA also adds a new major life activity category ? "major bodily functions," which includes, but is not limited to:

Functions of the immune system
Cell growth
Digestive, bladder, and bowel functions
Neurological and brain functions
Respiratory and circulatory functions
Endocrine functions
Reproductive functions

Other significant elements of the ADAAA include the following:

The determination of whether an impairment substantially limits a major life activity must be made without regard to the use of mitigating measures such as medication, medical equipment, prosthetics, hearing aids, mobility devices, oxygen equipment, etc. Simply put, if an employee's condition would qualify without such aids, consider the person to have a protected disability. There is one exception, however, for ordinary eyeglasses and contact lenses.

An impairment that is "episodic or in remission" is a disability even when inactive "if it would substantially limit a major life activity when active." Examples may include cancer, epilepsy, and post-traumatic stress disorder.

An individual subjected to an action prohibited by the ADA (for example, failure to hire) because of an actual or perceived impairment will meet the "regarded as" definition of disability, unless the impairment is minor and "transitory" (actual or expected duration of the impairment is six (6) months or less).

Employees without disabilities cannot sue for "reverse discrimination" under ADA.

Broad Coverage

The ADAAA states that "the definition of disability in this Act shall be construed in favor of broad coverage of individuals under this Act, to the maximum extent permitted under the terms of the Act." It is clear that the changes in this Act will benefit employees by making it more likely that they will qualify for reasonable accommodations and the ADA's protections.

Furthermore, the ADAAA states that the intent of these changes is that employers stop engaging in "extensive analysis" to determine what constitutes a disability under the law, and focus instead on complying with their obligation not to discriminate and to provide reasonable accommodations to individuals who are otherwise qualified to do a job.

What To Do:

In light of the changes to the Americans with Disabilities Act, SESCO recommends that you take the following action:

Review job descriptions to ensure that elements of the job listed as essential functions are truly job-related and consistent with business necessity.

Update policies and procedures to reflect the changes made the by the ADAAA.

Ensure there is a formalized process in place for addressing requests for reasonable accommodations.

Educate supervisors and managers about the ADAAA changes.

Advise supervisors and managers to consult with Human Resources (or SESCO) whenever an employee requests an accommodation. Stress that they don't immediately refuse the request or retaliate in any way against the individual for making the request.

Reconsider past accommodation requests from current employees who were denied accommodation because it was determined that the employee's impairment did not satisfy the ADA's definition of a disability.

When in a position to take adverse action against an employee with a medical condition, be sure to have well drafted documentation of the legitimate, non-discriminatory reason for the action.

SESCO retainer clients receive annual audits. SESCO consultants will be placing focus on ADAAA compliance in our audits to reduce our clients' potential liability under ADA. We also have updated our ADA compliance manual to include up to date forms, updated policies and new staff recommendations to assist to ensure compliance with the ADAAA. The cost for this updated manual is $35.