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The SESCO Report – December 2010

2010 In Review What to Expect in 2011

A Look Back at Significant Developments in 2010

The 2010 National Defense Authorization Act (NDAA) provided further expansion of military family leave. Previously, exigency leave was available to family members of Reservists or members of the National Guard who are called to active duty. The NDAA expands exigency leave under FMLA to eligible family members of active-duty service members. Also, the law extends the military caregiver leave provision to veterans, in addition to individuals currently in military service. The law expands the caregiver leave to include veterans who are undergoing medical treatment, recuperation, or therapy for serious injury or illness that occurred any time during the five years preceding the date of treatment, recuperation, or therapy.

The U.S. Department of Labor (DOL) issued an Administrator's Interpretation that clarifies the definition of "son" and "daughter" under FMLA to ensure that an employee who assumes the role of caring for a child receives parental rights to family leave regardless of the legal or biological relationship. The DOL interpretation expands applicability of FMLA to nontraditional families, including unmarried partners and families in the lesbian-gay-bisexual-transgender community. As the interpretation makes clear, an uncle who is caring for his young niece and nephew when their single parent is called to active military duty may exercise his right to family leave. A grandmother who assumes responsibility for her sick grandchild when her own child is debilitated will be able to seek FMLA leave from her employer. Likewise, an employee who intends to share in the parenting of a child with his or her same-sex partner will be able to exercise the right to FMLA leave to bond with that child.

Breaks for nursing mothers. As part of the health care reform legislation passed in March 2010, the Fair Labor Standards Act was revised to provide unpaid breaks for nursing mothers to express breast milk for her nursing child for up to one year after the child's birth. The employer must provide a place, other than a bathroom, that is shielded from view and free from intrusion from co-workers and the public for an employee to use when expressing breast milk. An employer that employs less than 50 employees is not required to provide reasonable break time or a shielded place for nursing mothers to express breast milk if these requirements would impose an undue hardship by causing the employer significant difficulty or expense.

The Hiring Incentives to Restore Employment (HIRE Act) allows an employer to claim tax benefits for a newly hired employee who has not worked more than 40 hours during the 60-day period preceding the date of employment. Employers who hired unemployed workers after Feb. 3, 2010 and before Jan. 1, 2011 may qualify for a 6.2% payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers. In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax return.

COBRA Subsidy. After several extensions, the COBRA subsidy ended May 31, 2010. The subsidy was available to individuals who were involuntarily terminated. The employer paid 65% of the COBRA premium for up to 15 months of continued health insurance coverage. Employers were reimbursed for the premium payments through payroll tax credits.

Posting Requirement for Federal Contractors and Subcontractors. Effective June 21, 2010 the U. S. Department of Labor implemented a regulation requiring federal contractors and subcontractors to post a notice advising employees of their rights under the National Labor Relations Act (NLRA). The notice informs employees of federal contractors and subcontractors of their rights under the NLRA to organize and bargain collectively with their employers and to engage in other protected concerted activity. Additionally, the notice provides examples of illegal conduct by employers and unions, and it provides contact information to the National Labor Relations Board (NLRB), the agency responsible for enforcing the NLRA.

Form I-9 Electronic Signature. In July 2010 the Department of Homeland Security (DHS) published a final rule on the electronic signature and storage of the Form I-9. The final rule permits employers to complete, sign, scan, and store the Form I-9 electronically.

The Paycheck Fairness Act stalled in the U. S. senate on November 17, 2010, when supporters failed to gather enough votes to advance the legislation. Political observers agree that the bill has little chance of passage over the next two years once Republicans regain control of the House of Representatives in the 112th Congress. The legislation would amend the Fair Labor Standards Act to allow for unlimited compensatory and punitive damages in sex-based wage discrimination suits and would decrease the affirmative defenses available to employers in such cases.

Health Care Reform. Perhaps the most significant development in 2010 was the passage of health care reform legislation. The following requirements for group health plans are effective for the plan years beginning on or after September 23, 2010 (or January 1, 2011 for calendar year plans):

- Health care tax credits available to certain small employers
- Dependent coverage until age 26
- No lifetime cap on the dollar value of health benefits
- No preexisting condition exclusions for children under the age of 19
- No cancellation of coverage except in situations of fraud

What Employers Can Expect in 2011 and Beyond

Health Care Reform. Although many of the changes associated with health care reform do not occur until 2014, the following requirements are effective January 1, 2011:

- Over-the-counter medicine is not reimbursable for FSA, HRA, and HSA accounts
- Non-medical withdrawals from Health Savings Accounts (HSA) are taxed at 20% (was 10%)

Misclassification Initiative. The IRS and the U. S. Department of Labor have announced a massive "Misclassification Initiative" to determine if independent contractors are properly classified. The IRS estimates that as many as 80% of workers classified as independent contractors are actually employees. As part of the crackdown, the Department of Labor is hiring 100 new auditors solely to investigate misclassifications. The federal government predicts this new effort on employee misclassifications will reap at least $7 billion in federal revenue over the next ten years. The DOL believes that misclassification is more prevalent in several "high-risk" industries including construction, janitorial, home health care, child care, transportation, and warehousing.

FLSA Recordkeeping. The Department of Labor Wage and Hour Division plans to publish a notice of proposed rulemaking in 2011 on Fair Labor Standards Act (FLSA) recordkeeping regulations. The regulations under development will require that covered employers notify workers of their rights under the FLSA and provide employees with information regarding their hours worked and wage computations.

The Employee Free Choice Act is now virtually certain not to see a vote. The Act would basically eliminate the secret ballot election process for establishing representation by a union. The new battleground for the objectives embodied in the bill will be the federal agencies charged with enforcing the nation's labor law, specifically the National Labor Relations Board.

One key area of contention between emboldened Republicans and their Democratic counterparts will be health care reform. While some in the Republican party are calling for repeal of the legislation, this is unlikely given the President's veto power. However, it is possible that parts of the reform plan may be changed or eliminated through defunding efforts by Congress.

Job-based health care benefits have been the primary vehicle for individuals' health care insurance. Unlike wages, employer-provided health insurance is not subject to income and payroll taxes. However, given the nation's deficit situation, the leaders of the President's deficit commission have proposed to limit the tax break or eliminate it altogether. Repealing the tax break for employers could raise several hundred billion dollars in annual federal revenue. A separate group, the Bipartisan Policy Center, is proposing to cap the health care tax break in 2018 and eliminate it over the next 10 years.

Statistics of Interest

The Gross Domestic Product (GDP) — 2.8% growth in 2010; about the same in 2011

Interest rates prime rate predicted to be 3.25% through 2011

Inflation rising to 1.5% in 2011, up from 1% for 2010

Weak employment growth in 2011; unemployment likely to be at 9.5% at end of 2010; should be slightly lower in 2011

Employers estimate their health care benefit costs will increase an average of 8.9% for 2011, compared to an average increase of 7% for 2010

The median salary increase budget for 2010 was 2.5%. Projections for 2011 show a modest increase to 3.0%

IRS Mileage $.51 per mile

9 Things Employees Want From Their Managers (And 5 Things They Don't)

Different employees crave different things from their managers.

For example, some employees want a hands-on boss who stops by with a "How are things going?" every couple of hours. Others don't care to see their boss but once a year at the performance review.

Unless you're a mind reader, it's impossible to know exactly what your employees want from you. But a survey of 500 U.S. employees-published in the book "What People Want," by Terry Bacon-reveals what matters most to employees.

9 Things Employees Need

1. Honesty. 90% say they want honesty and integrity from their manager. Lies and secrets are the biggest killers to credibility.

2. Fairness. 89% want their manager to be fair and to hold all employees accountable to the same standards.

3. Trust. More than 86% want to trust-and be trusted by-their manager.

4. Respect. 84% want to respect-and be respected by-their manager.

5. Dependability. 81% say they want to be able to count on their manager when needed.

6. Collaboration. 77% want to be a part of their manager's team and be asked to contribute ideas and solutions.
Shutting employees out will shut them up-and send them shipping out.

7. Genuineness. 76% want their manager to be a genuine person. Employees sometimes spend more time with their boss than with their families-they don't want a phony.

8. Appreciation. 74% want their manager to appreciate them for who they are and what they do. When was the last time you handed out a "Thank you!" or "Great job!" to employees?

9. Responsiveness. 74% want their manager to listen, understand and respond. Be a sponge, not a brick wall.

5 Things Employees Don't Need

While it's important to know what your employees need, it is just as vital to understand what they don't want from their manager. Among the survey's somewhat surprising findings:

1. Friendship. Only 3% want their manager to be a friend. As in parenting, it's more important to be a leader, mentor and example than a buddy.

2. Conversation. Only 14% want to have interesting conversations with their manager.

3. TLC. 24% say they want their manager to "care for them." That doesn't mean you have to be cold and detached, but most employees aren't looking for a best friend in their boss.

4. Emotional support. 25% want emotional support from their manager. Employees typically look for that among co-workers rather than a boss.

5. Cheerfulness. Only 28% want a cheerful or happy manager. They'd rather respect you than like you.

Bottom line: These traits are important to understand, but they don't apply to every employee. That's why it's best for managers to understand what each individual employee craves and then try to fulfill those needs. In the end, more satisfied employees stick around longer, are more loyal, do better work and make a manager's job much easier.

Dish out praise when it's due. And then let co-workers know. Recognizing a job well done isn't expensive, but it will mean the world to your employees.

Lead by example. Employees of great leaders will go to the ends of the earth to do a good job for them. Employees under poor leadership will simply go.

Keep workers engaged. Bored employees are neither happy nor productive. To keep your employees engaged and satisfied, present them with challenging assignments and opportunities to grow and develop.

Conduct a "stay" interview. Don't wait for employees to leave before you ask them how things are going. Use regular "stay" interviews to get feedback, compliment high performers and inspire them to do more. Use these interviews to gauge how well you are meeting employees' needs. Seek out their suggestions on what you and the company can do to improve.

Create a circle of trust. Employees are happier and work harder when they trust their leaders. They decide which leaders they can trust based on how their fellow employees, company vendors and customers are treated. Ask yourself: Do I treat people at work with respect?

Plus, remember that trust is a two-way street. Your employees need to feel that you trust them as well.

Special Thanks to SESCO Clients!

Magnetic Technologies Corporation
Wytheville, VA

Carolina Eagle Distributing
Rocky Mount, NC

L and D Well Services, Inc.
Vansant, VA

Lourdes Hospital
Paducah, KY

Nashville, TN

SESCO Client Feedback

"Joel's diligence was instrumental in Hapco finding the right match for its open HR position. Very timely and thorough."

~ G. David Oakley, Jr., President, Hapco — Aluminum Pole Products

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"Very good always get prompt answers."

~ Jeanette H. Lanier, Hubbard Realty Company

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"Bill, thanks for everything. There's not that many of my business associates that I believe really care about my problems. But, you do and I appreciate your professionalism."

~ Mike Albano, Albano & Associates, PLC

Merry Christmas and a Happy New Year!

The SESCO staff wishes our valued clients and subscribers a very Merry Christmas and a Happy New Year!

We look forward to the new year, 2011, for the continuing privilege and opportunity of providing our human resource management and employee relations services. We deeply appreciate the many opportunities you have provided our professional staff in serving your "people management" needs in 2010. We value your continued trust and confidence as we begin the 66th year of our firm's history in serving American management.

May continuing good health, happiness, and success be your constant companions in the new year.

~ The SESCO Staff

The Holiday Office Party....Don't Let a Good Time Turn Bad

This time of year is the occasion for the traditional office party, when co-workers gather to enjoy the holiday cheer. One of the questions frequently addressed in planning for the party is whether or not alcoholic beverages will be served.

Increasingly, employers are being held liable for the acts of intoxicated employees. To eliminate this risk at your holiday function, you may choose not to serve alcoholic beverages. If alcoholic beverages will be served, consider these precautions:

Before the party, be sure to communicate to employees that excessive drinking will not be tolerated.

Convey to employees that the holiday party is purely a social event and that attendance is voluntary.

Hold the party at an off-site location and use professional bartenders to serve and monitor alcohol consumption.

Do not provide open bars. Instead, provide cash bars and implement a drink limit per individual (using a ticket system).

Stop serving alcohol early, well before the party's scheduled ending time.

Offer a wide variety of non-alcoholic beverages and serve plenty of food to slow alcohol absorption.

Arrange for alternative transportation for intoxicated individuals.

If the party is held at a hotel, arrange for a block of rooms that employees can reserve at a discount.

Although these suggestions won't eliminate liability, they will minimize your risk and will promote a holiday season of happiness and safety.

Upcoming SESCO Events

Effective Leader/Manager

March 9-10, 2011
Courtyard by Marriott
Bristol, VA

March 16-17, 2011
Brown Distributing
Richmond, VA

Human Resources: The Basic Course

April 9-10, 2011
Courtyard by Marriott
Bristol, VA

April 13-14, 2011
Brown Distributing
Richmond, VA

(SESCO has partnered with one of our valued clients, Brown Distributing, to host our Richmond Seminar Series.)

State and National Business and Trade Associations, Chambers of Commerce and Human Resource Associations are welcome to contact SESCO to book a professional speaker for annual conventions and seminars. Contact Bill Ford at 423-764-4127 or by email