The Advantage, October 1996

New Minimum Wage

The $4.25 minimum wage we have all come to know and love is a thing of the past. On August 20, 1996 President Clinton signed legislation that increases that minimum by 90-cents per hour.

This increase will come in a two-step process. The first 50-cent increase is effective October 1, 1996. On that day, the new minimum will be $4.75 per hour. Next year, on September 1, 1997 the additional 40-cents will become effective making the minimum wage at that time $5.15. The U.S. Department of Labor claims that 10 million workers around the country will see increases in their paychecks as a result of this new law.

Two notable exceptions to the increases were built into the legislation. The first, a "training wage" of $4.25 per hour is allowed for employees who are under 20 years old during their first 90 days on the job. The second exception applies to workers who receive most of their earnings in the form of tips. Employers in these cases will be able to continue paying the current minimum of $2.13 per hour, unless the workers don't collect enough tips to bring their pay to the new minimum wage level.

What you should do now: Employers should take action now to assure they are able to meet the new minimum wage requirement of $4.75 per hour as of October 1, 1996. Review all of your payroll records to determine which employees are paid less than that amount today, and be sure you increase their wage rate to the new minimum on the first of October.

Second, replace your old "minimum wage posters" with the one we have included with this issue of The Advantage.

Terminating Workers Who Owe You Money

From time-to-time, workers may leave your payroll still owing you money for unrepaid loans, unreturned employer property or salary advances. Whether the employee leaves by resignation or dismissal doesn't matter under California's Labor Code.

The employer may not hold an employee's paycheck until property has been returned or loan repayment made. Nor can the employer deduct the amount owed from the final paycheck unless there has been a formal written agreement with the employee prior to the departure.

If you have a repayment agreement with a resigning employee, it may continue after the employee leaves the payroll. That leads to our recommendation.

How can an employer collect its money or its property when an employee leaves the payroll?

The answer is simple. Provide written agreements for every occasion when you give the employee company property for use on the job. These agreements should clearly indicate the employee's obligation to return all company property upon termination.

Similar agreements can be used for wage or salary advances also. If you have sales people paid a "draw against commissions" who take the draw but don't earn the commissions, your agreement should spell out the details of repayment if it is required. If one of your employees asks for a vacation advance, and they are requesting payment for time actually accrued, you may not require repayment. Personal loans, however, may require repayment.

Is Overtime Confusing?

The subject of overtime has been in the media a lot recently. Many employers have expressed some confusion about what they are supposed to do now.

Nothing has changed, folks. Both state and federal legislatures have been fussing about the subject, but nothing has come ... yet ... which would cause us to change our current practices.

To summarize your current obligations:

• Pay 1.5 times base rate for hours over 40 in a work week. (All states)
• Pay 1.5 times base rate for hours over 8 in a day. (California)
• Pay 2.0 times base rate for hours over 12 in a day.
• Credit compensating time off ("Comp Time") at 1.5 or 2.0 times base rate not straight rate.

Stretching HR Departments

According to a study by The Olsten Corporation reported by HR Magazine in its August, 1996 edition, workloads in three-quarters of this country's HR departments are increasing.

For HR managers who are in that 3/4 of the professional population, the story is no "flash" of news. There has been a gradual trend in this direction for some time. Stable or dropping HR headcount with increasing responsibilities.

Since it is not possible to put 10 pounds into a 5 pound sack, what are HR managers to do? The answer is that many of them are accelerating their use of "outsourcing." That is to say, they are turning to service providers outside their own organizations for work they can no longer accomplish in-house themselves.

The study found that 55% of over burdened HR managers are turning to consultants and freelance workers. 82% of the HR respondents are using temporary staffing services to increase their flexibility while not adding to payroll headcount.

The next time you face a project deadline, and you don't have enough hours in the day to meet it, give us a call. Affirmative Action Plan development is an example of such a project we can lift off your shoulders.

Victoria's Secret Accused of Sex Discrimination ... Against Women

Mail Order Digest reports that a class action RICO suit was recently filed in federal court, alleging that Victoria's Secret's promotional campaigns are sexually discriminatory.

"According to the complaint, Victoria's Secret regularly offers male catalog recipients $25 off any $75 purchase of Victoria's Secret products. In contrast, the complaint alleges, females are only offered a discount of $10. The lawsuit, which was filed on behalf of all female recipients of the Victoria's Secret catalog, seeks to permanently enjoin Victoria's Secret from offering different discounts to males and females. Additionally, the plaintiff is seeking several million dollars in compensatory damages, as well as punitive damages.

"Moral to the story: When developing offers, and pricing strategies, make sure they can not be perceived as discriminatory in some shape or form. In today's sue happy world, the more successful you become, the more chance there is that someone will want to sue you and take it away. Whether you deserve it or not."

In the same publication, a separate story tells how Fingerhut cuts 570 jobs from its Minnesota location and moves them to Florida. Why? Because they need bi-lingual workers fluent in both English and Spanish. Minnesota doesn't offer as many as are needed, so ... Florida, here we come.

A new facility in Tampa will open later this year to provide Fingerhut's customer service representatives with a new home.

(SOURCE: Mail Order Digest, 2807 Polk St. NE, Minneapolis, MN 55418-2954 (612) 788-1673)

Avoid Retaliation Charges

According to John Wiley & Sons, Inc. EEO Review, "charges of retaliation are one of the most, if not the most, common sources of litigation against employers."

Retaliation is some adverse action against an employee by the employer due to the employee's participation in what the law defines as a "protected activity." Over recent years, more and more employee activities have been placed into the "protected" category. Here are some of them:

Employee Actions Protected from Retaliation

• Filing a discrimination complaint.
• Filing a workers' compensation claim.
• Filing unfair labor practice charges.
• Engaging in "protected concerted activity" under the National Labor Relations Act. (Union organizing efforts)
• Filing a complaint about work-place safety hazards or refusing a work assignment due to safety or health concerns.
• Reporting concerns about environmental violations.
• Reporting fraud, corruption, or other suspected criminal activities on the part of the company or its managers.
• Cooperating in government investigations.
• Joining a union or advocating for a union.
• Refusing to operate an unsafe commercial motor vehicle.

You may not take any action to "get back at" an employee who does one of these things. It doesn't matter how angry you might be at their actions.

If you already have the employee on a disciplinary program, you may continue with that program, as long as it is not related in any way to their "protected activities."

OFCCP to Allow Extensions

On June 17, 1996, Shirley J. Wilcher, Deputy Assistant Secretary for Federal Contract Compliance, signed an order (ADM 96-1) which delegates authority to field managers for deadlines on its work.

Up to this time the agency has maintained a 60-day time limit on completing investigations and compliance reviews. Contractors who requested extensions due to valid reasons were always denied their requests.

This new order gives Regional Directors the authority to grant extensions up to 240 days for compliance reviews on supply and service contractors. It also allows extensions up to 120 days for investigations of possible discrimination or discrimination complaints. Regional Directors are allowed to delegate their authority to District Directors if they wish.

Extensions may only be granted under the new directive for good cause. "Good cause" is a matter of Regional and District Director judgment, according to the order, but may result from factors such as:

• the nature and complexity of the case, or case priorities;
• delay due to a reasonable contractor request;
• delay awaiting action from other OFCCP offices.

Any OFCCP case (investigation or compliance review) which is older than the new limits will be considered "aged." Regional Direct-ors will be held accountable for all "aged" cases and will not be permitted more than 5% compared to the entire case inventory.

If you are facing a compliance review, and have a legitimate need to request more time for response, you may now do so, knowing at least, that it might possibly be granted.

More Damage Awards Now Taxable

Congress recently enacted legislation which comes as bad news for employees receiving compensatory and punitive judgments in their legal action against employers.

Jury awards and out-of-court settlements for discrimination suits, for example, will now fall into the taxable category of income.

Under the new law, payments for "non-physical" injuries will generally be taxable. The law says "emotional distress" isn't a physical injury or physical sickness. It also says "punitive" damages, designed to punish someone for wrongdoing, are generally taxable.

The new bottom line is: Tax collectors will want a share of most damage awards employees receive from discrimination complaints. The exceptions are damage awards made for personal physical injury or physical sickness.

This legislation has come after several years of court battles over the taxability of such awards.

Enhanced Retirement Incentives Ruled Valid

The U.S. Supreme Court put to rest the issue about the validity of employers requiring "release of claims" on force reduction agreements.

In Lockheed Corp. v. Spink, 1966 U.S. LEXIS 3717 (June 10, 1996), the Court overturned a ruling of the Ninth Circuit Court of Appeals. Basically, the new ruling says there is nothing inappropriate about conditioning plan benefits upon the release of claims.

Employers who use incentives to increase voluntary participation in force reduction programs may continue to require employees to waive any claim to employment-related action in order to receive the incentives. Employers reasoned it didn't make sense to pay someone extra money to voluntarily leave the payroll only to be sued for discrimination or some other allegation once they were gone. Now they won't have to worry quite as much.

Telecommuting Talk

If your organization hasn't yet approved of one or more workers working at home from time-to-time, it won't be long before you do. Like other employment benefits, this new work mode is being perceived by employees as a benefit. Thus, it is often on the table during recruiting negotiations.

Before you rush into the fray, you had better learn some of the terms which are used to describe the activity and its various relations.

• Distributed work: A term for any type of work done by groups of people who are separated in time and space.
• Telecommuting: The condition in which employees conduct some or most of their work at a location other than their primary office. Nearly always, employees are connected to their primary office by electronic equipment such as computers and FAX machines. Usually, employees work from home, but increasingly they are working from remote centers or office satellite locations.
• Satellite: A small office designed for only a few employees and located near their homes.
• Telecenter: A larger office, also located near employees' homes, that is shared by people from many different employers. A telecenter might house people whose employers are not even located in the same city or state.
• Virtual office: Refers to employees who don't have a permanent office and spend most of their time on the road, working from hotel rooms, cars, clients' offices and other off-site locations using portable electronic equipment.
• Free addressing: When employees use whatever office space is available on the days they come to the primary office.
• Hoteling: Similar to free addressing, but employees can call ahead to schedule use of a particular office.
• Job sharing: Two employees, working on different schedules, share the responsibilities of one job.
• Flextime: Employees choose starting and ending hours, but usually must be at work during a core period when all employees are present.
• Compressed workweek: All full-time employees work the same number of hours per week, but have the option of compressing their hours into fewer than five days.

In terms of workability for these new programs, the Conference Board conducted a survey which produced the following results:

Telecommuting Greatest Advantages

The Manager's View:

• Improves productivity
• Supports diversity initiatives
• Retains valuable employees
• Reduces employee stress
• Improves employee morale
• Increases employee loyalty

The Employee's View:

• Increases flexibility
• Increases motivation/commitment
• Reduces commuting time
• Increases productivity
• Limits distractions

Telecommuting Greatest Challenges

The Manager's View:

• Upper management resistance
• Difficult to supervise employees
• Fear of other employees' resentment
• Fear of culture change
• Fear of poor customer service
• Difficult to schedule meetings

The Employee's View:

• Difficult to remain part of the team
• Hard to stay in the communication loop
• Negative perceptions
• Fear of hindered career advancement
• Household distractions

N. Lamar Reinsch, a professor at the Georgetown University School of Business, has these key pieces of advice for employers who are giving consideration to new telecommuting programs:

• Offer training to foster good relationships. Without training, relationships between managers and employees could deteriorate after the first few months of starting a telecommuting program.
• Redefine authority. Successful telecommuting means that workers move away from the traditional management model and adopt a more balanced role.
• Provide the right tools. Support telecommuters with equipment such as additional telephone lines, e-mail, voicemail, pagers, fax machines and computers.

For more information, contact one of the following organizations:

• American Telecommuting Association, (800) ATA-4YOU; member-ship organization for telecommuters.
• Association of Commuter Transportation, (202) 659-0602, (202) 393-3497; nonprofit that educates people about alternatives to the solo commute.
• Institute for the Study of Distributed Work (ISDW), (510) 834-1485; non profit group that studies telecommuting. Internet Web page: http://www. dnai.com/~isdw This page includes ISDW's quarterly newsletter.

(SOURCE: Incentive , November 1995, Bill Publications, (212)592-6493)

New Portability of Benefits Requirements

Officially known as H.R. 3103, Public Law 104-191 became law when President Clinton signed the papers in a White House ceremony on August 21, 1996. The new law is also known as the Health Insurance Portability and Accountability Act.

Although key requirements won't become effective until July 1997, when they do, employees will be able to keep their health insurance coverage when they switch or leave their jobs.

Title I of the new law prohibits insurers from declining to offer whole group coverage to a group purchaser. It allows plans to establish eligibility, continuation, enrollment, or premium requirements, provided the requirements are not based on health status, medical condition, genetic information, or other factors.

It will now regulate the circumstances in which a plan may impose a benefit limitation or exclusion because of a preexisting condition. It mandates crediting of previous qualifying coverage in computing any waiting period specified for preexisting conditions.

Under the new law, employers who do not now provide health insurance coverage to workers are not required to begin coverage. It does govern the movement of employees from one employer to another where both offer health insurance benefits to workers.

Under these new provisions, when a workers switches employers, the new employer must provide coverage to both the worker and any family members who were covered under the former employer's plan. The new employer can't turn down coverage of the new employee, nor can it charge higher premiums because of any health problems that were covered under the previous employer's plan.

Although waiting periods for coverage with the new employer are still permitted, the new law limits the maximum waiting period to one year. In the past, some plans have excluded preexisting conditions for as long as two years.

If your medical condition has been covered under the old employer's insurance program for six months, the maximum waiting period for coverage of that condition with the new employer's plan would be six months.

In the past, some plans have excluded pregnancy as a preexisting condition and would not provide coverage. Under the new law, that is no longer permitted. Pregnancy benefits must be provided to any new employee if they are offered as part of the existing medical coverage to existing employees. Also included for coverage are newborns and adopted children, who were sometimes prohibited coverage when workers moved from one job to another.

As you can imagine, there are many complex provisions within the new law. For example, even though these portability provisions apply to plan years beginning after June 30, 1997, some plans might not have to conform to the new rules until 1998. Another example of the complexity of provisions can be seen in the rule governing credit for prior coverage to shorten waiting periods on preexisting conditions. To qualify, an employee must not have gone without group coverage for more than 63 days.

This legislation is interwoven and entangled with provisions and modifications to provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). As you can imagine, it will take some study for employers to fully understand what their new requirements are under each of these federal laws. Reporting requirements may have to be adjusted also as employers get more deeply into the provisions of these laws.

Employees who are faced with waiting periods permitted under the new portability requirements may find it beneficial to continue their old insurance plans using provisions of COBRA, even though they would have to pay all of the premiums out of their own pockets during the transition period. At least they would be allowing themselves continuing coverage of preexisting conditions. Once they are eligible for coverage of those conditions under their new employer's plan, they can end COBRA coverage and use benefits offered by the new employer.

COBRA coverage is also important for people who decide to leave their employer to begin their own business. The new law guarantees these people individual insurance coverage, regardless of any health problems they may already have. But, to qualify, they must have been covered by a group plan for at least 18 months, and must have used up all of the COBRA benefits they may have been entitled to.

Falling through the cracks, so to speak, are the people who have not been covered by any group insurance plan in the past. They are not guaranteed any coverage under this new legislation.

However, those who are self-employed will be allowed to deduct a greater percentage of their health care expenses. That percentage will be increased over time. In 1997, it increases to 40% from the current allowance of 30%. In 1998, the allowance moves up to 45%. Ultimately, the deduction allowance will reach 80% in the year 2006. Also eliminated is the 10% penalty for early withdrawals from individual retirement accounts for certain unreimbursed medical expenses.

Some senior citizens will also get a break on their taxes from this new law. Beginning in 1997, long-term health care insurance premiums may be deducted from individual income tax, up to certain limits, as part of unreimbursed medical expenses over 7.5% of adjusted gross income.

States are going to be involved in monitoring and managing provisions of this new law. Yet, the federal government will not be giving up its oversight authority. For example, the law requires States to certify health plan purchasing cooperatives (HPPCs) when they meet requirements of the new legislation. If the States refuse to do so, the federal government will step in and provide the certification. You can imagine the rules there are for determining when that happens.

There are additional amendments to the Public Health Service Act which allow a health maintenance organization (HMO), to reduce the basic health services payment by permitting a "co-insurance deductible" for basic health services.

Then, when you thought you had heard it all, there are provisions in the new legislation for data collection and tracking. These are aimed at consumer protection and "health care fraud and abuse prevention." These are an attempt to have federal, state and local law enforcement efforts coordinated to control health care fraud and abuse.

Medicare's Federal Hospital Insurance Trust Fund will receive all criminal fines and civil penalties or assessments from prosecution of health care fraud cases.

Enough already. How all of these provisions will be put into practical use remains to be seen. The Department of Health and Human Services is responsible for issuing regulations implementing these new provisions for employers and insurance companies.

For more information on the law, visit the World Wide Web at http://thomas.loc.gov/

Glass Ceiling Case Settles for $525,000

According to a recent OFCCP press release, Trigon Bluecross Blueshield has agreed to a $525,000 settlement in a glass ceiling case.

The contractor, Trigon Bluecross Blueshield of Richmond, VA signed the agreement on December 7, 1995 resolving issues found during a compliance review begun by the OFCCP on December 14, 1994.

Under terms of the agreement, Trigon will pay $264,901 in back pay and interest to 34 women managers because they were paid less than male managers of equal qualification and seniority. The managers will also receive $108,971 in salary adjustments effective January 1, 1996.

The agreement also calls for $151,588 to be distributed to as many as 35 minority applicants who were unfairly treated in the hiring process for clerical positions during 1993 and 1994. The agreement provides for at least 21 job offers as well as retroactive seniority and fringe benefits for those who accept the offers. In addition, Trigon will take steps to prevent recurrence of the problems.

The largest glass ceiling case settled to date occurred in September 1993 between the OFCCP and Fairfax Hospital, Fairfax, VA. It totaled over $600,000.

Meanwhile, back in Kansas City, Kansas, the good neighbors at State Farm Automobile Insurance Co. agreed to pay $100,000 to settle a race discrimination suit brought by the Equal Employment Opportunity Commission (EEOC). (EEOC v. State Farm Automobile Insurance Co., DC Kan, No. 96-2010-JVL, 8/20/96). The original complaint was filed by David Wickersham claiming he was not hired as a State Farm trainee agent in Kansas City, Kansas because of his race.

And, in a case which may have meaning for many employers today, a Chicago-based manufacturer has settled an EEOC suit over an applicant with Carpal Tunnel Syndrome. (EEOC v. Joslyn Manufacturing Co., DC NI11, No. 95-CV-4956, 9/15/96). The company, Joslyn Manufacturing Co. makes metal parts and fixtures. In April 1993, it rejected job applicant Aaron Cruz for a punch-press operator job following a medical exam. Cruz had surgery for carpal tunnel syndrome in 1992 and Joslyn's doctor advised the company not to hire him for a position that might require repetitive hand motions. Cruz claimed he was fully recovered.

Joslyn has denied any violation of the Americans With Disabilities Act in settling the suit, and has agreed to pay Cruz an unspecified amount of money.

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The Advantage is published each quarter by: The Management Advantage, Inc. Please also take time to read the important articles in other issues.