Author: Gillian Flynn

There used to be a time when rewards and recognition programs were vague, elusive creatures. They could strike at any time, showering plaques, presents and prizes on employees whose managers thought they “did a great job.” There was no definition on what a great job was—it could have meant having a good attitude, helping out another department, even having a long streak of punctuality.

No more. Businesses today are beginning to understand the great gains to be had by linking rewards and recognition to a business strategy. (See “Targeted Rewards Jump-start Motivation,” Workforce, February 1998.) There are specific goals and outcomes expected. But just as important, employees must understand their roles in the greater scheme of things, understand what they must do to get the carrot, and why the carrot is being offered in the first place.

Communication. It all boils down to that one word, but that one word encompasses a lot of things. There’s a great shift in the communication of rewards right now. No longer is it satisfactory to have a once-a-year videotaped message from the CEO talking about company “stars.” Today’s rewards and recognition programs must be communicated in the same strategic manner for which they’re being used. Of course, that opens up a lot of questions. How should a company clarify a rewards system? How should a company communicate it? And how does HR know whether employees really understand the link between performance and rewards?

To get informed answers to these three important questions HR managers need to know, Workforce talked to a group of rewards and recognition specialists. They are:

• Carl Weinberg, principal in the Kwasha Lipton Group of Coopers & Lybrand LLP, an HR consulting firm. Weinberg is based in Westport, Connecticut and specializes in company rewards programs.
• Howard Weizmann, managing consultant for the Washington, D.C. office of Watson Wyatt Worldwide, a global HR consulting firm. Weizmann has specialized in benefits and HR for 22 years.
• Jan Burnham, a consultant in employee communications at the ROC Group (which stands for “Return on Communication”) in Chicago who specializes in return-on-investment for communication efforts.
• Deborah Gingher, vice president of HR Policy & Strategy for the Prudential Insurance Company of America based in Newark, New Jersey, a company known for its forward-thinking recognition programs. Since her appointment as vice president in July 1997, she has been overseeing a new customer-focused awards program.

The group diverged on some particulars, but agreed on common themes for success: Making sure the company and HR understand what the program is incenting, suitably tailoring the communications to the program, and ensuring employees understand what the criteria for recognition is—as well as the goals recognition represents.

What goals do you want employees to reach?
Before you roll out any kind of program, before you start the communication efforts, our panel says it’s absolutely key that top executives and HR professionals all have the same vision. Have a few meetings where you all share your idea of company goals and rewards program alignment. Executives should speak to where they want to go, HR can speak to how to get employees to get the company there. This is the meeting in which you’ll decide the best approach—monetary or not, broad-based or departmental.

Carl Weinberg:
“I like a monetary approach. Some of the most successful types of rewards systems are equity rewards, like stock options or profit sharing. Here’s what we advise employers to do: Start with the compensation committee deciding how to allocate equity between shareholders and employees. Should employees get a 2 percent stake or a 20 percent stake? If you’re a young company, you should be up at the higher end of the range. If you’re in a turn-around, in a time in which you’re asking people to take a considerable risk by coming to work there, then you should be at the higher end. A well-established company will be at the lower end. The next decision is how to allocate among different employee groups.

“Most companies do this pretty badly. They start by deciding how much they’ll give to the CEO, then how much to give to senior management, then everyone else gets whatever is left over. That ignores the central question of where the value is being created. In a pharmaceutical industry where the value is being created in the R&D trenches, you want to make sure a great deal of the equity is going there. A company should identify the positions where having someone outstanding in the role creates enormous value. In many positions, having someone outstanding is better than someone just good, but in a few key positions it makes all the difference. That’s much better than the traditional model where everyone in the same salary grade gets the same amount.”

Howard Weizmann:
“There’s a very simple premise: If you measure it, people will do it. If you measure it and pay for it, people will do it in spades. If what you measure matches up corporate goals and strategies, the company will be successful. That in sum total is alignment. The most effective way to guide a company is through rewards strategies. To decide a strategy, decide what’s going to make employees happy. [A company] with unhappy employees has as a consequence unhappy customers, and as a consequence won’t do very well. An increase in employee satisfaction leads to an increase in customer satisfaction and translates to an increase in revenue. That’s what you’re trying to do. That’s where the world is going.”

Jan Burnham:
“An effective incentive program targets different groups of the workforce on narrowly focused goals—it’s a rifle shot versus a shotgun approach. The advantage is, employees feel they can reach a specific business goal. It’s a focus they can have and measure and link to over the course of a year. This is as opposed to the old incentive programs which were difficult to communicate, because people felt like the targets were so big they couldn’t have an impact—they were vague “improve the bottom line” type of goals. So by narrowing the target, people are feeling like this is a portion of the objectives they can make a difference around.”

Deborah Gingher:
“We decided rather than to have one companywide program, our many businesses would emphasize their own criteria for rewards. For example, the formal recognition program of our operations and technology function is very specific to rewarding innovative, technology-based solutions for internal business clients. The unit is trying to incent technology folks partnering with business customers and providing creative technological platforms for their business solutions. The auditing function is trying to instill integrity, ethics and leadership among the audit staff. So it has the Extra MILE Award—Merit, Integrity, Leadership and Excellence. At Prudential, we [focus] on incenting specific behaviors unique to each function instead of a broader ‘you’re doing a hell of a job’ kind of thing.”

How do you tell your workforce what you want?
So you’ve decided on a rewards system, and all the executives are in agreement on the business goals the system is rewarding. Now you’ve got to present it to the employees in a way that makes sense to them.

Carl Weinberg:
“A lot of companies say you have to go super-creative to roll out any new employee program these days: You have to have videos and handouts and themes. I frankly disagree. The most important point is that the message is clear, not that the presentation is flashy. If the company is a ship, and the employees are guiding the ship through the rudder, you need to tell them the exact destination of where you’re going, and exact instructions for guiding the rudder. So be very specific in what you want them to do, and how you will reward them if they do it. Now creativity does have one largely unrecognized advantage. It shows that senior management is taking the program seriously. Employees see all the time and energy that went into it and think, ‘They really mean this.’”

Howard Weizmann:
“We have a saying that a good program poorly communicated is much worse than a mediocre program well communicated. You can have all the goals in the world but if you don’t tell people about them you’re never going to achieve them. For the actual communication, it should be sort of a food chain. The first thing you start with is a pay philosophy. Why are you paying people? Ask yourselves what activity your success is measured by. What are you about as a company? Once you’ve done that, you have to communicate those basic objectives. Tell employees, ‘We’re paying you to ship packages in good condition on time.’ For packers, that means this; for drivers that means this. Then link that with your program.”

Jan Burnham:
“Most [employers] want to start by talking about the new program and its features. It works best if that’s not your first step. I’d say there are four key steps. One: Make sure that when you talk, they’re willing to listen. You need to establish where the level of trust is. Do baseline measurements and focus groups to see where employees are in their openness to a new program, so when you talk to them they’re ready to listen. Two: Clearly articulate the business case—how the features of the plan link to it. Make sure they understand where the company is. Three: Describe the specifics of how the plan works. [Companies often make] the mistake of starting with the third step and leave the first two out. Four: Don’t introduce the plan and walk away. People need ongoing understanding throughout the year of how the business is doing relative to the goals. A lot of time it’s forgotten. Plan designers get the idea that it’s done once they roll it out.”

Deborah Gingham:
“Our communication is helped in two ways. First, employees are nominated by internal customers. For instance, HR people can be nominated for excellence in their four HR roles: administrative expert, change agent, employee champion and strategic partner. Then we do a videotape of the customer talking about why the person was nominated. The tape is shown to all 1,000 HR professionals across the country, so they get a very clear picture about what the customer requires. Then we do a lot of employee communications—marketing, e-mails. Most rewards are quarterly so every quarter employees see the nomination process and reward process. E-mails and the company magazine talk about what the criteria is so employees are constantly being barraged by the criteria and specifics on why the winners win. So they get lots of examples. Winners of those awards have a very clear idea of what makes them a success. My advice to other companies would be: Be very specific about the behaviors you’re trying to incent; stay away from broader ‘you did a good job’ programs—they’re too vague and too hard to communicate effectively.”

How do you know employees ‘get it’?
Finally, it’s important to know whether, three or six or 12 months down the line, employees are still making the connection between their behaviors, their rewards and the business.

Carl Weinberg:
“The best way to know whether the message has sunk in is to listen to what your employees are saying and see if they’re using the same rhetoric. If they’re using the same rhetoric—hopefully not in a sarcastic way—then you know the message has sunk in. If they use it in a sarcastic way, you know some message has sunk in but probably not the one you wanted. Or management can ask people, ‘How are we doing on xyz?’ when they’ve communicated that xyz is important. If people have to fumble for the answer, then they haven’t gotten the message. If they give you a crisp response whether things are going well or not, that shows it’s something they’re thinking about.”

Howard Weizmann:
“We have a very large client in the delivery industry, and we did a film. We interviewed random employees on the street. We found they were very much aware of what was important. Drivers said, ‘If we don’t get there first our competitors will be there.’ Then we interviewed people in shipping. They said, ‘If I don’t get the right package to the right place our competitors will.’ This showed they understood what the company was all about. So ask employees. If they give [those kinds of answers], the company has been successful in communicating and orienting its goals.”

Jan Burnham:
“Always follow up with meetings; this starts a focused dialogue about the business. Soon the talks become less about the rewards and more about the business as a whole. That’s when you know they’ve got it: It’s less about the program and more about the good of the business.”

Deborah Gingher:
“We do quarterly employee surveys with questions that get to recognition and compensation. And we see that the [program works]. People are really excited and proud and incented when they win these things—even if it’s just a teddy bear. Because we’ve so tailored the competencies that will make [employees] win, we’ve done a better job versus a broad-based approach. People understand what the company expects from them. Rewards and recognition programs are only as good as employees’ understanding of them. Make sure the executive team is in agreement on the program’s goals, make sure they’re communicated clearly and strongly, and follow up later to ensure the workforce really ‘gets it.’”

In short, recognition programs require money, time and energy to create—following up can help ensure they actually get some use.

Under Deborah Gingher, vice president, HR policy & strategy, the Prudential Insurance Company of America has a healthy mix of formal recognition and flexible on-the-spot rewards. The Newark, New Jersey-based company tailors its formal recognition by department so that managers can avoid what Gingher calls the vague “you’re doing a hell of a job” approach. The tighter focus ensures employees know exactly what the company expects of them, she says.

Customer-nominated awards are given out quarterly, and Gingher promotes both the nomination and reward process in company newsletters and e-mails. Typically, Gingher spells out what the award recognizes. For instance, in HR’s case, the ACES award celebrates HR professionals who excel in “the four roles an excellent HR function must fulfill in support of the company’s objectives: Administrative expert, change agent, employee champion and strategic partner.” [For more information on each of these four HR roles, please visit www. workforceonline.com/win/index.html] Gingher follows the explanation with a description of each winner and his or her exact efforts. “Using the winners as examples gives everyone a true-life idea of what we’re looking for,” she says.

A new Customer Focus Award recognizes employees who “take the initiative, [go] beyond their job requirements and act as motivators, leaders and innovators on behalf of our customers.” A cross-section of operations and systems employees make up the quarterly selection committee. Winners receive a $300 “night on the town,” recognition [at] events, a crystal award memento and eligibility for a “Best of the Best” award—$1,000 in Prudential mutual funds.

Just as important as the formal recognition, says Gingher, is allowing managers the flexibility to offer informal goodies. Teams who’ve completed a project early or under budget, for instance, may find themselves treated to a Broadway show, spot cash or dinners. One division head, who’s active in the Make-A-Wish Foundation, gives donations to the group in the name of excellent employees, and gives out a special Make-A-Wish teddy bear in recognition. “I like the idea of tying recognition to a non-profit,” says Gingher. “People go crazy to get these teddy bears. Employees not only know they’re appreciated, but that they’re making a little boy or girl happy.”

Workforce, July 1998, Vol. 77, No. 7, p. 34.

It’s an uncomfortable thing to have your company named in an em-ployment lawsuit. It’s an even more uncomfortable thing to find your name on the list as an individual defendant. More and more, that’s just what’s happening to supervisors and HR professionals. Larry C. Drapkin, partner in the labor and employment law department at Los Angeles-based Mitchell Silberberg & Knupp L.L.P., explains what happens when a supervisor is named, and offers possible defenses.

Is the naming of individual supervisors a recent trend?
It isn’t brand new—it’s been happening a number of years now. There are a number of reasons for it. Of course in some instances there’s a perception by the plaintiff that these supervisors are legitimate defendants who’ve done something to contribute to the problem.

But also I think there’s a philosophy among some plaintiffs’ counsel that the more defendants the merrier, because that’s more likely to force a larger number of attorneys to get involved, and higher costs will be associated with the case and perhaps that will force the defendant into settlement. So there’s an economic-pressure issue. Moreover, I think the perception is that it gives managers a personal interest in getting the case done with because now they not only have to deal with defending a case on behalf of the company, but they have the added pressure and personal upset of being named as a defendant.

Also from a strategic point of view, naming an individual supervisor can sometimes help a plaintiff to keep a case out of federal court. Sometimes a case can be removed by the defendants to federal court—if, in a company with [national offices], the plaintiff is from one state, the defendant from another. Sometimes supervisors in the plaintiff’s state are added as defendants so the case will stay in state court, because the perception is state courts apply the law in a way that’s more plaintiff favorable. There’s a way to challenge that—bringing a motion to dismiss on grounds that this is a sham defendant.

Is there a type of case in which individuals tend to be named?
You see it more in the discrimination arena. But we’ve seen it in cases that don’t involve discrimination also—in cases where the plaintiffs alleged that somebody caused them emotional distress or other issues not related to discrimination.

When a person is named individually, what should he or she do?
First, just like any defendant, the person needs to have the best representation possible under the circumstances, and should take it very seriously because they could potentially face legal liability based on the strengths of the claims. They need to coordinate a defense with the employer. Oftentimes there’s the possibility of a joint defense with representation by a company’s attorney. Of course, if a supervisor is accused of personally having done some bad acts, there’s a strategy question of whether there should be joint representation. Then there are issues of insurance coverage and practical issues of cost. In most cases those issues are worked out cooperatively with the company being involved in the process.

Can an individual supervisor be found guilty and the company not be found guilty?
There are some circumstances for which that could happen, depending on the state. In some harassment cases that could happen if the supervisor is the one being sued for harassment. Some states have strict liability doctrines when a supervisor is sued; others look at where the conduct occurred—in the workplace or in someone’s home on the weekend—because if the conduct is outside of the scope of the supervisor’s employment, the individual could have personal liability and it is possible the employer wouldn’t be liable. But in the garden-variety case, when a person doesn’t like the decision the supervisor made—”He terminated me because I’m a woman”—that kind of claim, if successful, leads to employer liability.

What are defenses for individuals?
There’s a growing body of case law that, depending on the state, suggests that a supervisor would have a defense to certain claims that are based on normal personnel decision-making. In California there’s a case pending before the state Supreme Court that will address whether an individual can be sued for discrimination when alleged discriminatory action arises out of personnel decision-making as opposed to intentional conduct outside of the management function. For in-stance, direct sexual harassment by a supervisor isn’t part of the normal decision-making process. Distinguish that from a situation in which someone says “I was discriminated against because of my age or sex. They kept someone who’s male and let me go because I’m female.”

In these types of cases a growing number of federal and state courts have held that the individual supervisor can’t be sued. There’s a defense of manager’s privilege that essentially acknowledges that managers can’t perform their jobs without engaging in decision-making that might be second-guessed by a court. [That privilege maintains] that when they’re acting in the realm of normal management function, supervisors should have protection against personal liability because they’re acting on behalf of the employer. The employer bears the liability if managers aren’t performing their jobs well. So that’s the type of defense that would help a manager. It’s a defense that should always be considered.

What else should be considered?
Because there are a number of defenses available to managers who are sued in their managerial capacities, it’s very important to explore whether they could get out of a case on an initial motion. The question is whether [the attorney] can look at the allegations in the complaint and analyze the law and say, “No, this is precluded by the manager’s privilege” or “This is precluded because you can’t sue an individual for discrimination under this state law or Title VII.”

What’s an example?
On discrimination, the law varies from state to state as to whether an individual can be sued. In California, there’s a significant case, Janken v. G.M. Hughes Electronics, that stands for the proposition that [complaints] arising out of the personnel functions aren’t actionable under state discrimination laws. Like-wise, a number of federal circuit courts have held that under Title VII an individual supervisor can’t be sued.

Oftentimes [the attorney] can get an individual [removed from a case]. When I litigate one of these cases the first thing I do is try to weed out as many of the defendants as I can. Oftentimes it’s by negotiation with the other side: I let them know why as a matter of law they can’t maintain a claim against the individual. Sometimes it’s as easy as that.

What can supervisors do to safeguard themselves?
In the workplace, supervisors can never do their jobs too well. That’s not the only reason they get sued, and some people will get sued despite doing excellent jobs. But if you want to talk about the first way of preventing a personal lawsuit, people need to do their jobs in the best way possible. They should know what to look for and how to handle themselves as supervisors; they should make sure they’ve received all the appropriate training on sexual harassment and workplace discrimination issues; they need to make sure they know how to identify and investigate complaints and do so in a timely fashion. HR should make sure managers know how to identify problems before they fester. These things will help managers maintain a better rapport with individuals as opposed to them being seen by the plaintiff as the cause of the problem. That’s important because the workplace relationship has an emotional component—always has, always will.

Workforce, June 1998, Vol. 77, No. 6, pp. 119-122.

Yeah, they’ll skim the paper, drop by the occasional job fair. But professional-level employees will not stop there. They turn to the Internet—and to their peers—to not only search for jobs, but search for the right company offering those jobs. Employees today are a more jaded, cynical breed. They know the recruiting spin, so make sure whatever you tell them is true, because they’ll find out.

Take Kevin Daniels, a marketing manager in Memphis, for example. When job searching, he first heads to the Internet to several job-bank sites. When he finds a position that sounds promising, he stays on the Internet, searching news groups for information on the company. “I do Internet media searches to find employers with a strong commitment to internal promotion,” he says. “And to make sure they don’t have bad downsizing records.”

Similarly, Alice Dawson, a business consultant in Dallas, is networking to find her next position. She dials up career groups for women to get the skinny on employers’ work-life balance; she goes online to poll women’s career groups. She wants to find a company whose culture backs up its work-life policies. “Companies will always tell you they do, but then you get there and the whole atmosphere says it’s not OK to leave early. So I talk to all the working moms I can to find companies that honor their word. And I’m still looking . . .”

Where will your company get the most bang for its recruiting buck? To reach managerial-level employees, a good reputation beats the flashiest promotions. Make it easier on searchers by posting not just PR on your company Web site, but any good press you’ve had—even if it doesn’t directly pertain to employment.

Don’t let incoming resumes lie fallow, says Tennessee job-search coach Tracy Bumpus. Lately, Bumpus says, professionals who admire a company are submitting their resumes whether they’ve seen a job posting or not. “They figure in this job market, the company’s going to need to hire sooner or later,” she says.

Workforce, June 1998, Vol. 77, No. 6, p. 48.

Human resources professionals today often find themselves on the horns of painful dilemmas—when meeting the requirements of the Americans with Disabilities Act (ADA) means violating other workplace statutes. But two recent rulings signal the courts’ attitudes when the ADA crosses paths with issues such as workplace violence and union agreements. Gerald D. Skoning, a partner at employment law firm Seyfarth, Shaw, Fairweather and Geraldson in Chicago, explains the cases.

What’s the basic issue in Duda v. Board of Education of Franklin Park Public School District?
Duda is a classic case of the delicate juggling of the risk of workplace violence on one hand and on the other, psychiatric disability discrimination claims. [The plaintiff] was a janitor in a junior high school and was diagnosed with bipolar disorder by a psychiatrist; he was a recovering alcoholic on medication for the depressive condition. On work breaks, when he felt anxious or depressed, he’d write his thoughts in his diary. One night co-workers read the diary and reported to their supervisor that it contained a death threat against his supervisor. The school [officials] put him on leave and said when he got a clean bill of health from his doctor they’d reconsider his status. His psychiatrist said he was fine, and independent psychiatric evaluations required by the school district also said he was stable and not a danger to anyone.

What happened then?
The district [officials] said he could come back to work under these conditions: He must continue participating in Alcoholics Anonymous, and continue psychiatric counseling and taking his medication. And—here’s where the [grievance] came in—he’d be transferred to a school where he wouldn’t work with other people, and he could forget about applying for a bus-driver position, which he wanted to apply for. So he filed suit claiming that the school district had segregated him on the basis of his psychiatric disability and that the denial of an opportunity to apply for a promotion to bus driver was discriminatory.

How was the case ruled?
The district court threw out the case; it found no violation of the ADA. The 7th Circuit Court of Appeals this January reversed the decision and said that he was entitled to a trial under the claims that he was segregated and disqualified from applying to be a bus driver. But the [wording] of the decision was telling: The court basically apologized for having to remand this for a trial and suggested the district may have another bite at proving the conditions [required for reinstatement] were appropriate.

What does the ruling mean for employers?
It means that prudent management responses to a very difficult workplace situation can still leave [employers] faced with a trial. The decision [the court of appeals made] was almost required by the broad language of the ADA. I’m not sure it’s going to be easy for employers to get rid of a case like this on an early motion to dismiss.

What’s the likely scenario for employers then?
It’s more likely they’ll have to develop a factual record, and then move for summary judgment—which means there will be a deposition and statements from psychiatrists to show [an employee] does present a direct threat and that steps taken by management to deal with potential threats were entirely proper and prudent.

Is there any other advice on the issue?
In spring of last year, the Equal Employment Opportunity Commission (EEOC) issued psychiatric disability guidelines—suggestions regarding what kinds of situations are covered by the ADA. The decision makes clear that the EEOC’s interpretive guidelines, while not controlling on the courts, are a body of expertise which courts will defer to. So it suggests that employers should be very familiar with them.

In general, is it better to guard against workplace violence, even if it means possible problems with the ADA?
If management knew [an employee] was under psychiatric care, knew the employee was potentially violent yet didn’t take steps to protect [other employees and customers], and if violence does occur, there’s an enormous liability. An employer is well advised to err on the side of making a workplace safe.

Can you explain the Kralik v. Pennsylvania Turnpike Commission case?
An employee who has a disability wants to be reasonably accommodated, and that accommodation would require the employer to violate terms of a collective bargaining agreement. In this case, a toll collector suffered a back injury unrelated to work. She said that a reasonable accommodation would be to be [relieved] from forced overtime—under the local Teamsters union contract, if a [senior] employee doesn’t want to do overtime, then less-senior employees can be forced to take the overtime assignment. She said she wanted to be relieved from forced overtime, because she couldn’t work more than eight hours at a time due to her injury, [according to] her doctor. The turnpike commission [officials] said that would directly impact the rights of other employees with greater seniority, and the commission would face a grievance by the union for violating the contract. So it would be an undue hardship—and accommodation isn’t required if it means undue hardship.

What happened then?
The district court [agreed with the commission], and ruled that accommodation couldn’t be required under the ADA. The 3rd Circuit Court of Appeals agreed. The issue still sticks in the craw of the EEOC, which has taken the position that if an accommodation would impact conditions of a collective bargaining agreement, then the employer should go to the union and ask the union to change the contract—which is incredibly naive and unrealistic.

What is the trend, then, for resolving issues of overlapping jurisdiction between the ADA and unions?
Now we have this case, and there’s a building area of case law that has developed a sort of rule: If an accommodation under the ADA conflicts with terms of a collective bargaining agreement, it is per se an undue hardship and therefore can’t be required. But the EEOC persists in its position.

What are the lessons for employers handling this issue?
Unionized employers [might want to] negotiate provisions in their collective bargaining agreements that say in the event a request for accommodation made by a union employee conflicts with provisions in the agreement, management and the union will make their best efforts to resolve the issue through mutual negotiation.

Is there anything else employers should keep in mind in order to respond appropriately?
The second lesson is if an employer gets hit with a situation like this, one tactical move is to immediately notify the union that a request has been made and tell the [leaders] it’s up to them to resolve this. Then when the EEOC asks the employer what has been done to make an accommodation, the employer can say it’s the union’s problem—and sic the government authorities on the union, because in most of these cases, the employer is willing to make the accommodation if the union goes along.

Workforce, April 1998, Vol. 77, No. 4, pp. 107-111.

When it comes to hiring employees—particularly those who will dabble in a company’s finances—consumer reports can be crucial tools. You want to know if the person you’re considering putting in control of the company’s books has a history of bad credit or bankruptcy. It’s not so simple to run checks any more. In September 1997, the Consumer Credit Reporting Reform Act took effect, changing the Fair Credit Reporting Act in fairly substantial ways.

Dana Connell, a shareholder at employment law firm Littler, Mendelson, Fastiff, Tichy and Reinhard in Chicago, explains the changes and offers a four-step plan for compliance.

Can you offer some background on this act?
Until shortly before [the act took effect], I think most employers weren’t aware of it. It had nowhere near the fanfare of other employment statutes, such as the FMLA [Family and Medical Leave Act] and the ADA [Americans With Disabilities Act]. Also, the agency that enforces it—the Federal Trade Commission (FTC)—isn’t one most employers are used to dealing with.

My sense is that the act was designed to deal with the fact that there are a lot of consumer-report databases out there that can be used, and that they may not always be accurate. People who apply for jobs may be penalized by information they’re not aware of, and that is wrong.

So what’s the main thrust of this act?
Employers who want to run a consumer report on an applicant must inform that applicant and receive authorization in a way they never had to before. Historically what a lot of employers did was have a boilerplate at the end of the application form that advised the applicant of a number of things, including the fact that the company might try to get a consumer report on that applicant. That’s no longer good enough. You now have to have a disclosure that you’re going to seek a consumer report, and that disclosure has to be in a separate document.

What’s considered a consumer report?
Virtually any compilation of information on an individual that’s prepared by a third-party agency for the employer’s use in making employment decisions is going to be covered by the act. So if, for example, I used a third party who conducted reference checks for me, that would be covered under the act even though it’s not a credit report. By the same token, there are some things that aren’t covered. For instance if HR employs somebody who does direct surveillance—maybe because HR suspects an employee of theft—that would not be covered by the act because it’s direct observation by the company conducting that surveillance and not by a third party.

So what’s the first thing HR should do in light of this act?
The first thing is something that’s not hard to do, but employers have to prepare for it, and that’s this disclosure and written consent requirement. The disclosure has to be provided in a separate document—employers can include the written consent in it. They’re just notifying the applicant that a consumer report might be requested.

In addition to basic consumer reports, there are investigative consumer reports. An investigative report is prepared on the basis of interviews, whereas general consumer reports are based on database information. So for an investigative report, employers have to do both the disclosure required for a consumer report, and because the FTC views this type of report as a little more invasive, they have to notify the applicant that an investigative report might be made, that the applicant may request additional information as to the complete and accurate nature and scope of the investigation, and that the applicant may request a summary of [applicant] rights that the FTC has prepared. In the case of an investigative report, the employer must notify the applicant within three days of conducting the investigation that an investigation is planned. If the applicant asks for additional information regarding what the employer is looking at, the company has to provide that in five days.

What’s step two?
The employer has to [provide] a certification to the consumer reporting agency. This is just a step Congress has inserted to make sure there’s a record that people are doing what they have to do. This is a certification not to a government agency but to whomever the company is using to get the consumer report or investigative consumer report. It’s a certification of the purpose for which the report is being obtained and certification that the report will not be used for any other purpose. In the case of investigative reports, the employer also has to certify that if an applicant makes a request for further information, that the company will give it to him or her.

What’s step three?
It concerns any adverse action the employer may take based on the report. Before HR takes any adverse action based in whole or part on the report, it has to provide two documents to the individual. One is a copy of the consumer report the company has relied on; another is a summary of rights that the FTC has prepared—those summaries are typically provided by the consumer agency when they give the report. The employer has to do both those things before it takes the adverse action. If HR has requested a consumer report but that isn’t the reason HR chose not to hire the individual, it doesn’t have to give notice.

How provable is it that HR didn’t base its decision not to hire on a bad report?
It’s hard to prove. HR might want to consider sending a copy of the report and summary of rights with a cover letter indicating it was a courtesy and that the report wasn’t relevant to the hiring process. At least then there’s no way the FTC can argue the company wasn’t in technical compliance with the act.

Once HR has decided to take adverse action, how long must it wait?
The law doesn’t say how long employers have to wait before implementing the adverse action. Most employers aren’t going to be able to sit around and wait to have some long dialogue with the individual about it.

What happens after the company takes adverse action?
HR has to provide an adverse-action notice to the person it declines to hire. The notice has to be provided orally, in writing or electronically. It has to contain the name, address and phone number of the agency that provided the report. The employer must provide a statement that the consumer-reporting agency didn’t make the adverse decision; employers have to indicate the consumer has a right to obtain an additional free copy of the consumer report from the consumer-reporting agency by making a request within 60 days. Employers also must include a statement regarding the applicant’s right to dispute the accuracy or completeness of information with the consumer-reporting agency.

Does the act require the employer to say what part of the report caused the adverse action?
No, and the act doesn’t provide for some sort of appeal process by which the company may change its decision based on whatever the applicant resolves with a reporting agency regarding the accuracy of the information. The purpose of the act is to make the individual aware the employer is pursuing this information and to whether the company has any obligation to correct its actions if the information it relied on was wrong. Conceivably the individual could come back after the problem has been straightened out, but it’s not some articulated procedure set forth in the act.

Can the applicant obtain damages for technical mistakes?
Yes. This is a statute for which employers have to be careful they don’t make mistakes that are really just technical mistakes, because if they do, the applicant can pursue all kinds of damages as well as attorneys’ fees. I don’t believe there’s a limit, and I believe applicants can file for punitive damages under the Fair Credit Reporting Act. But most of this stuff employers can prepare for and develop forms for. As long as HR is willing to be kind of nerdy about it, it can prevent technical mistakes. For example, what employers should be doing right now is developing these notice and authorization forms. They should have some idea also of how they’ll respond if they’re requesting investigative consumer reports and the applicant requests more information regarding the nature and scope of the investigation—because they’re only going to have five days to put that together. They ought to be preparing what forms they’re going to use when they take adverse action based on credit reports. There are just some forms they need to have ready in the word processor to get out when these things occur.

Workforce, March 1998, Vol. 77, No. 3, pp.79-82.

Workforce talked with Cara Jane Finn, vice president of employee services for Remedy Corp., about HR. The highlights:

Q: Why did you get into HR?
A: It’s a sad but true story — I owned and managed a wholesale manufacturing shop in San Diego back in the late ’70s and early ’80s. We had some sales people, some warehouse workers, and 100-plus folks who sewed nylon wallets. Most of the workers weren’t legal immigrants. Late one day one of our sewers came to me and in broken English explained how the woman who sat next to her had pierced her finger with the sewing needle and had been sitting with it for more than four hours, not knowing what to do. She was terrified I would fire her.

I rushed to her and in my broken Spanish explained that not only was she one of our best workers, but I wouldn’t do that to anyone. I took her to the hospital. I then realized that I had neglected the entire human part of running a business. I dove into both the legal and ethical sides of human resources, and it changed my entire worldview of business. I ran five more businesses (before coming to Remedy), and my focus on people and cultural environment grew with each experience.

Q: What’s the best part of your job?
A: Watching folks (at every level) grow, succeed and be ecstatic about their jobs! Another wonderful thing is being a leader in the cultural development of the organization.

Q: What’s the toughest part?
A: I think my “tough part” is no different than any other manager. It’s that first, difficult, honest conversation — whether it’s with a receptionist, the entire company or the CEO — when things aren’t going well.

Q: What was one of the best decisions you’ve made as an HR person?
A: Personally, one of the best decisions I ever made was to be frank as a way of life. Speaking your mind and being honest can be dangerous, but if you’re careful and kind about it, the results are wonderful. Professionally my focus has always been to be the best business person I can be who has a focus on people. I think that focus has served me well.

Q: What advice do you have for other HR professionals?
A: You must be a leader in your company — by that I mean you must be part of the strategy and soul of the organization. If you don’t know “who you are” as a company and what your “values” are, discover what they are, or find a company that knows. Vision and values are the foundation of greatness, but the magic is in people. Give them vision, focus and meaning, and nothing will stop you.

Q: Is there any area you’re currently concentrating on?
A: Hiring difficulties. Recruiting is probably one of the toughest things any company in Silicon Valley can do. There are companies out there willing to do just about anything — for engineering and marketing people especially. Seven years ago, when I started here, that wasn’t the case. There were more engineers than jobs in this area. We were a small start-up and it was easy to get good talent. Then the valley started to heat up in ’95. Things got stirred up in recruiting. But even with the recruiting environment changing so much, our recruiting practices have never changed. It’s easy to say we do “fun” things, these attention-getting things, for recruiting purposes, but it’s not the case. It’s not in reaction to the environment — it’s just part of who we are.

Q: What will be your big push this year?
A: We’ve been discussing turning up the fire. We’ve had tremendous success, but that was yesterday. We want to turn our attention to the next four years. I’ve started hounding [the executives] about really sending this message — really focusing on the future. It takes a lot of guts when things are going as well as they are to shift the focus on doing more. Not everyone is comfortable with that. But being one of the old-timers here, I know it’s incumbent on us to get over our success and focus on the future.

Workforce, February 1998, Vol. 77, No. 2, p. 40.

The highlights:

Q: Why did you decide to get into human resources?
A: I’ve always loved learning. I actually taught school for two years after college. I love [how I feel] when people’s behavior changes because of what they’ve learned, and that I may have had something to do with that. That [love] flowed into the people areas of business — HR. People learning and developing and growing, that’s tremendous; there’s nothing like that, nothing more challenging or rewarding.

Q: What’s the best part of your job?
A: Every HR person I talk to says the challenges today are greater than at any time. When you begin to address those challenges, people are the only thing that makes the difference. They’re the bottom line. So the opportunity for HR to make a huge difference is there.

Q: What’s the toughest part?
A: If you take that challenge — to make a difference — it makes the job really tough. It’s stressful. It used to be the key part of my job was making sure the lines in the parking lot were straight. Now I know what we do affects our competitiveness, affects the company. I sometimes don’t sleep as well as I used to.

Q: What does being a strategic business partner mean to you?
A: What being a strategic business partner does not mean to me is reacting to business manager requests and problems. What being a strategic business partner does mean to me is taking a leadership position on those issues which truly influence the strategic direction of the business.

Q: What does being a leader in the organization mean to you?
A: For an HR person, being a leader in the organization means you have the same opportunity, responsibility, accountability and influence as any other member of the leadership team. Being a strategic leader means you can show evidence that you have actually influenced the direction of the business.

Q: What advice do you have for other human resources professionals?
A: What frustrates me is I see some HR people who have their heads down, who say we [in HR] have no respect, we’re not important. But then I’ll talk to another HR person, maybe someone within the same organization, and [he or she says] just the opposite. The only thing that limits us is intelligence, energy and commitment, and the attitude and mindset of the HR person. I encourage human resources people to look at themselves, to see how they feel about change, creativity and ownership. If they in all honesty don’t like change, are adverse to owning a situation, they’ve got a problem. They’re not going to be able to influence the organization in the way it needs to be influenced.

Q: What’s the greatest contribution HR professionals can make in the years ahead?
A: To lead organizations in their action to hire, train and motivate individuals while, at the same time, being the initiator of actions that result in organizational success.

Q: You’ve been recognized on numerous occasions as being a leader in your field. To what do you attribute this?
A: First, TI as an organization has demonstrated business success. Secondly, the HR team has initiated activity in a broad range of areas which have been successful, such as diversity initiatives, work/life initiatives, major redesign of benefits programs, innovative reward and recognition activities and succession planning. It should be noted that these activities are evident globally.

Workforce, February 1998, Vol. 77, No. 2, p. 32.