Author: Rick Bell

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Human Capital Disclosure May Soon Be Mandated By the SEC

Earlier this year I wrote about the first-ever ISO standards for human capital reporting, which were published in December.

These called for the voluntary public disclosure of measures for both large organizations and small/medium-sized organizations. While some European and Asian governments are likely to adopt the ISO recommendations as law, the United States Congress was never likely to follow suit, so it appeared that adoption in the U.S. would be voluntary and slow.

The U.S. Securities and Exchange Commission just published proposed rulemaking, which, if implemented, will bring human capital disclosure to U.S publicly traded companies much sooner than anyone imagined. This is a game changer for our profession and a VERY BIG DEAL!

On August 8 the SEC proposed to fundamentally change the way publicly traded companies report. Under the current rules, the SEC specifies 12 items that must be included in the narrative description that accompanies financial statements. Companies have to address all that apply to them. For example, these items include a discussion of the principle products and services offered, new products and segments, sources and availability of raw materials, whether the business is seasonal, competitive conditions and the current backlog of firm orders. The last required item is the number of employees, which is the only human capital measure currently required for disclosure.

The SEC proposes to move away from an explicit list of required items and instead adopt a principles-based approach where each company must discuss whatever is material with the understanding that the list of topics will differ by industry and company. (In financial reporting, material means any information that would be important to an investor in deciding whether to buy or sell a security.) The SEC does, however, share a nonexclusive list of items that it believes will apply to most companies. This list includes five items from the current list of 12 and two new items: human capital and compliance with government regulations. (The other five items are revenue-generating activities, development efforts for new products, resources material to the business, any business subject to renegotiation or cancellation, and seasonality.)

Also read: Human Resources Gets Its ISO Approval 

Furthermore, simply disclosing the number of employees will not satisfy the need for human capital disclosure.

In their own words, “Item 101(c) (1) (xii) [the current rules] dates back to a time when companies relied significantly on plant, property, and equipment to drive value. At that time, a prescriptive requirement to disclose the number of employees may have been an effective means to elicit information material to an investment decision. Today, intangible assets represent an essential resource for many companies. Because human capital may represent an important resource and driver of performance for certain companies, and as part of our efforts to modernize disclosure, we propose to amend Item 101 (c) to refocus registrant’s human capital resources disclosures. Specifically, we propose replacing the current requirement to disclose the number of employees with a requirement to disclose a description of the registrant’s human capital resources, including in such description any human capital measures or objectives that management focuses on in managing the business.” (Page 48 of the proposed rule Modernization of Regulation S-K Items 101, 103 and 105.)

Did you just feel the earth shifting below your feet? You should have. The importance of this proposed rule for our profession simply cannot be overstated. Many in the profession have worked years to increase the visibility and use of human capital measures. The time finally may have come for it in the U.S.

While it is true that the SEC will not prescribe specific human capital measures, it does provide some examples, including measures for attraction, development and retention of personnel. The test for disclosure, however, is clear: materiality. Can you imagine any CEO or CFO telling analysts, the public and their own employees that people are not a material contributor to the company’s success, especially after saying for years that people are the company’s greatest asset? I don’t think so. So, if this rulemaking is finalized, human capital disclosure is coming and coming soon.

Most companies will rely on their heads of HR as well as accounting for guidance on what to include in their narrative on human capital. If for no other reason than risk mitigation, these leaders in turn will look to the human capital profession for guidance. And they will find ISO 30414:2018, the human capital reporting standards published in December 2018. These standards recommend the external reporting of 23 measures for large companies and 10 for small/medium. These measures will be a natural starting point as companies decide what to discuss, so if you don’t yet have a copy, get one, and be prepared to proactively help your organization be a leader in human capital reporting.

The proposed SEC rule is available here. The rule is 116 pages, but the section on human capital is under section IIB7, pages 44-54.

This story originally appeared in Workforce‘s sister publication, Chief Learning Officer.

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Decision on Positive Drug Test Reveals the Future of Medical Pot and Drug Testing

Jon Hyman The Practical Employer

Richard Turner worked as a crane operator for Phillips 66.

The company’s substance abuse policy allowed for random and post-accident drug testing for “Cannabinoids, Cocaine, Opiates, Phencyclidine (PCP) and Amphetamines,” and mandated termination for any positive test.

On April 24, 2017, Turner was selected for a random drug test and provided a urine sample. Three days later he was involved in a workplace accident and was again tested.

The following day, Phillips 66 learned that Turner’s April 24 sample tested positive for amphetamines. As a result, the company fired him.

According to a letter Turner later provided from his physician, Turner had not been prescribed amphetamines, but had taken over-the-counter medications, including Sudafed, for unspecified “medical conditions.” The April 27 sample, and the sample from a retest Turner himself took, both tested negative. The company’s retest of the April 24 sample, however, again tested positive for amphetamines.

In Turner’s subsequent disability discrimination case challenging his termination, the 10th Circuit Court of Appeals concluded that Phillips 66 did not violate the ADA via its drug testing.

Under the ADA, an employer “shall not require a medical examination and shall not make inquiries of an employee as to whether such employee is an individual with a disability or as to the nature or severity of the disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity.” Turner argued that Phillips 66’s drug screen violated this rule because it revealed the potential use of a legally prescribed medication. The 10th Circuit disagreed:

The EEOC has indicated a drug test does not become a medical examination simply because “the results reveal information about an individual’s medical condition beyond whether the individual is currently engaging in the illegal use of drugs,” such as “the presence of a controlled substance that has been lawfully prescribed for a particular medical condition, this information is to be treated as a confidential medical record.” A test for the illegal use of drugs does not necessarily become a medical examination simply because it reveals the potential legal use of drugs.

Pay careful attention to that last sentence:

A test for the illegal use of drugs does not necessarily become a medical examination simply because it reveals the potential legal use of drugs.

Assume for a second that Turner tested positive for legally prescribed medical marijuana instead of amphetamines. Would this result be any different? Marijuana remains federally illegal. If an employer drug tests for marijuana, according to Turner v. Phillips 66, a positive test does not become an unlawful medical exam in violation of ADA merely because it could cause the employee to reveal medical information to justify the positive test.

In other words, drug tests remain 100 percent legal, whether or not they cause an employee to reveal medical information in response to the drug screen.

A great result for employers as we continue to figure out the difficult intersection between the lawful use of impairing drugs and the ADA.

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An Employee’s Disability Is Not a ‘Get Out of Jail Free’ Card for Workplace Misconduct

Jon Hyman The Practical Employer

Does a medical leave of absence grant an employee a free pass for pre-leave misconduct discovered during the LOA?

This question is squarely at the center of the court’s decision in Williams v. Graphic Packaging International (6th Cir. 10/31/19) [pdf]

James “Randy” Williams worked as a department manager for Graphic Packaging. In late 2014 or early 2015, Williams told his supervisor, plant manager Eddie Lee, that he had been re-diagnosed with prostate cancer. In September 2015, Williams requested time off for treatment, which the company granted from Sept. 14 through Nov. 23, 2015. During that leave, however, several of Williams’ subordinates lodged complaints against him of inappropriate treatment. The company investigated, and concluded that “Williams had been using manipulative and coercive tactics to control his employees and prevent them from communicating with upper management.” As as a result, shortly after Williams returned to work, the company fired him.

Williams sued, claiming (among other things) that firing on the heels of a return to work after cancer treatment is tantamount to disability discrimination.
The 6th Circuit court of appeals disagreed.

The evidence demonstrates that Graphic Packaging terminated Williams’s employment after receiving complaints from an employee, which were later corroborated by interviews with fellow employees, an internal investigation, and depositions from Graphic Packaging upper management, Human Resources employees, and employees who reported to Williams. The record reflects that Williams violated Graphic Packaging’s Core Values by mistreating employees both publicly and privately, limiting access to upper management, and propagating troubling and salacious rumors concerning upper management. Williams has even admitted that he committed at least some of the acts which so clearly violated Graphic Packaging’s Core Values.

No employee gets a free pass on workplace misconduct just because he or she suffers the misfortune of having cancer (or any other disability). The company concluded that the allegations against Williams (which its internal investigation corroborated, and many of which Williams himself admitted) merited termination. Those allegations included Williams telling his subordinates that he “owned” them; spreading an unsubstantiated rumor that Lee had molested his own daughter; cheating on a mandatory safety exam; and forbidding his subordinates from speaking to plant management.

Cancer and other ADA-protected disabilities are not “get out of jail free” cards for workplace misconduct. Do your due diligence, and treat the employee the same as you would have treated him or her if the disability didn’t exist. If the misconduct warrants termination, so be it. Terminate, and defend your legitimate, non-discriminatory decision. Otherwise, you risk setting a precedent that the misconduct is OK, which will make it that much more difficult to hold others accountable for that same misconduct in the future.

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A Workplace Nip and Tuck

I recently received a story pitch with the subject line, “Do Baby Boomers Need to Go Under the Knife to Keep Their Edge at Work?”

Sure, roll your eyes. Scoff at a pitch with a pandering subject line that cries “Open me!” like a pricey bottle of booze at a five-dollar white elephant holiday gift exchange. Crinkle your nose and sniff a haughty sniff at the thought of someone actually undergoing plastic surgery to keep an edge at work.

I don’t think it’s a silly question at all.

But you do. Then again you look like an Olympian thanks to that Lagree ultimate strength workout in the corporate fitness center. If Adonis was your co-worker he’d stare slack-jawed at your chiseled body as you passed by in the company cafeteria with your meatless burger, bowl of elderberries and glass of oat milk.

Perfect hair, stylish glasses (not that you need them; it’s just accessorizing to make you look smarter), glowing skin (of course you use product, doesn’t everybody?), and the shoes. Yes, it’s all about the shoes.

You’re at the top of your game. You crush it daily.

Until, well … until you’re getting ready for work one early spring morning and the bubbly yet acerbic TV personality on your go-to morning news program blurts out that your company has been acquired. The deal is just a passing mention following the always informative “Mr. Fix-It” segment but the chill racing down your spine buries a big fat pit in your stomach. Your knees buckle and your cup of freshly brewed raspberry chai tea trembles like a swimming pool in an earthquake.

Your company was acquired by an out-of-state competitor. You’re stunned. And you’re angered because you didn’t hear about the multimillion-dollar acquisition from the CEO via a hastily called all-hands teleconference call, or a posting through the corporate intranet. Not even a terse, one-paragraph companywide email announcing the deal. No, it was a giggly morning news show delivering a body blow that radically alters your perfectly coiffed life.

It’s been your corporate casa for nearly three decades, which makes sense given that its inviting, folksy motto is “It’s our business to make you feel at home!” Sure you’d bounced from job to job early in your career searching for the right fit. I mean, who hasn’t? And after three decades on the job it’s OK to admit that you’ve toyed with the thought of retiring — not immediately mind you. There’s still a lot left in the tank.

Your “home,” however, has other ideas that don’t take into account your distant fantasy of spending part of your golden years mountain biking across the Peruvian Andes. The mentoring of junior executives whom you suspected were already at your pay level despite being half your age has come to mean nothing. The weekends spent hitting near-impossible deadlines, all the sweat equity dripping from that slightly wrinkled brow onto your place of employment — wow, reality sure bites sometimes.

Within a month it’s clear your job is in peril. A week after regulators were pleased and stockholders were paid out you also are out … out of a job. Because you know, as the new CEO proudly boasted on your go-to morning news show, “After any acquisition, there is a duplication of efforts, which results in some synergies, and unfortunately for a lot of people today, we’re realizing those synergies. These synergies will ultimately provide a better experience for the consumer.”

Well naturally. I mean, synergies. 

So now you are just another older worker in the job market. Self-doubt creeps in as you realize after your third rejection notice that ageism is a cold, cynical, perpetual workplace cycle that many employers flaunt in their never-ending search for younger, cheaper labor.

Where once you dismissed studies that found more than half of full-time workers in their early 50s were at some point forced out of their job and then experienced long-term unemployment or a huge cut in pay for years after, you now see that you are its living embodiment.

Two months ago you were a highly respected senior VP of product development. Now you’re unemployed, trips to the gym are infrequent and toast with butter and jam has replaced elderberries.

Those kids you mentored, the ones you took under your wing, not to mention out for happy hour? They are the ones interviewing you now. They all look so young and vibrant. You’ll do most anything to get back in the game, because you still have a lot to offer!

And, well, a nip here or a shot of botox there is justified to level the playing field. Going under the knife? Given your life’s new realities it’s not so silly after all.

I mean, synergies, right?

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Must You Tell Employees When You Are Surveilling Their Devices?

Jon Hyman The Practical Employer

It’s unusual these days for an employee not to have a device issued by their employer, or on which they can access their employer’s information — cell phones, tablets, laptops, and other computing devices.

Conventional wisdom (California notwithstanding) is that if the employer owns the device, the employee has zero privacy rights in that device, its use, or the information stored on it.

That conventional wisdom, however, might be changing.

The Federal Trade Commission just announced the settlement of charges it had brought against the developer of certain “stalking” apps.

What is a stalking app? It’s one that runs surreptitiously in the background of a device so that the user of that device does not know that the app is tracking their physical movements and online activities.

In this case, the apps in question “allowed purchasers to monitor the mobile devices on which they were installed without the knowledge or permission of the device’s user.” The apps also came with instructions so that the purchaser could “remove the app’s icon from appearing on the mobile device’s screen so that the device’s user would not know the app was installed on the device.”

Notably, one of the apps, MobileSpy, was specifically marketed to monitor employees.

The Settlement Agreement and Consent Order [pdf] specifically addresses the employment concerns raised by the app.

Prior to the sale or distribution of any Monitoring Product or Service, Respondents must obtain … [a]n express written attestation from the purchaser that it will use the Monitoring Product or Service for legitimate and lawful purposes by authorized users. The express written attestation must state the legitimate and lawful purpose for which the purchaser is using the device, which may include only the following: … 2. Employer monitoring an employee who has provided express written consent to being monitored….

In other words, while the FTC brought this case against the company that developed, marketed, and sold the stalking apps, the settlement specifically prohibits that company from selling the apps to an employer unless the employer certifies, in writing, that it will only use the apps to monitor employees who have provided express written consent to being monitored.

Legally speaking, this development is very interesting. The law is figuring out how to catch up to advancements in technology.

Practically speaking, I’m wondering why employers aren’t already obtaining consent before tracking their employees. In my mind, this issue raises a fundamental question of the type of employer you want to be, and the type of relationship you want to foster with your employees.

Do you want to be an employer that is open and honest with your employees that operates on trust? Or do you want to be an employer that slinks around behind your employees’ backs and breeds dishonesty and distrust? I know how I answer this question. How you answer it says a lot about who you are as an organization.

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New Study Points to Diversity and Inclusion as Key Driver to Company Success

A recent study focusing on diversity in the workplace found a strong correlation between diversity and inclusion functions and corporate business strategies that if well-aligned will reap a distinct positive impact on the organization’s reputation, employee retention and financial success.diversity

Global communications firm Weber Shandwick and management consultancy United Minds joined forces with KRC Research to conduct a new diversity study that focuses on the best practices of D&I functions that are well-aligned with the overall business strategy of the company, as well as the roles and responsibilities of chief diversity officers and the challenges facing them today.

“Diversity Officers Today: Paving the Way for Diversity & Inclusion Success,” which was released in September, surveyed 500 senior-level corporate D&I professionals employed at high-revenue companies in the United States. Elizabeth Rizzo, Weber Shandwick’s senior vice president of reputation research, said that the survey was about “their role, their attitude about the D&I function that they work for, and how it is integrated with the rest of the company.” The research categorized D&I professionals into three sections — Well-Aligned, Aligned and Misaligned — along a “D&I alignment continuum.”

Tai Wingfield, senior VP of diversity, equity and inclusion, Weber Shandwick.

After reading extensively about increased visibility on the work and investment that companies were making in D&I, researchers noticed a significant gap in the field. “We were surprised to find that there was very little research available that looked at the role of chief diversity officer as a whole,” said Tai Wingfield, Weber Shandwick’s senior vice president of diversity, equity and inclusion practice. “We thought there was a need to have some sort of research in place to arm chief diversity officers with best practices on what they could do more effectively, and to raise visibility around what this role entails and where it’s headed in the next couple of years.”

Full alignment is achieved when the actions of the D&I function and D&I staff members are integrated with the organization’s planned objectives in order to meet its overall business goals. This alignment has a substantial effect on new hires and resignations. The study shows that D&I activities impact 30 percent of new hires and 13 percent of resignations. Well-aligned companies have a 33 percent rate of position acceptances due to employee satisfaction of D&I at the company, as compared to aligned functions with 28 percent and misaligned functions with 24 percent.

D&I alignment was found to be a key driver of company reputation, as 79 percent of executives in well-aligned functions strongly agreed. This is substantially higher than in aligned D&I functions with 44 percent and misaligned D&I functions with 30 percent.

Financial performance was also positively transformed through D&I. An estimated 66 percent of executives in well-aligned D&I functions strongly agreed with this statement, which was also substantially higher than the 27 percent of executives in aligned D&I functions and the 30 percent in misaligned D&I functions.

“Having an aligned function means that you have a line of sight into the C-suite, that you’re getting the right investment in the space and that you have some sort of partnership with communications and marketing, which is critical in terms of achieving D&I goals and objectives,” Wingfield said. “All of that ladders up to increased reputation benefits, financial performance and better retention and recruitment of diverse talent.”

The biggest challenge that diversity executives face is making the business case for diversity and inclusion, followed by making diversity and inclusion values or outcomes externally visible. “I think that’s why we see the CDOs who are in well-aligned functions with the business note that partnerships between communications and marketing as a best practice, because it’s so important in terms of that external visibility piece,” Wingfield said.

Elizabeth Rizzo

Rizzo said that the most surprising finding within this study was that there are three things standing in the way of achieving full integration and alignment with the business strategy: Not all D&I functions had a dedicated leader (34 percent), many of these positions are only part-time (40 percent), and alignment was not always a top priority for some companies (18 percent).

“That seems to suggest that not every company really realizes the importance of having their D&I function being aligned, or having a seat at the table with the other business strategy goals,” Rizzo said.

As for the future of D&I, the study also found that CDOs are optimistic in their visions for D&I and the expansion of the position in corporate America. Approximately 81 percent have a positive outlook on the future of D&I, and 50 percent predict that most U.S. companies will have chief diversity officer positions in the next five years.

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Poor Taste Does Not Amount to Prohibited Sexual Harassment

Jon Hyman The Practical Employer

I once made the mistake of watching an episode of Orange is the New Black on an airplane.

The guy sitting behind was very uncomfortably enjoying the show along with me, and I shut it down.

Which brings me to Sims v. Met Council, a case in which an employee claimed her co-workers’ choice of television shows in the break room created a hostile work environment.
The show at issue is “Luke Cage,” which included some brief nudity. At the plaintiff’s request (and a brief argument) her co-workers changed shows. This incident repeated again later that day, with the co-workers again changing shows at the plaintiff’s request. It was undisputed that the show in question contained two scenes with nudity, each lasting less than a minute.
Stephanie Sims reported the incident to management, which assured her that the break-room television would no longer be able to connect to steaming services. Management also counseled the offending employees on the employer’s respectful workplace policies and its prohibition against retaliation.
The district court had little difficulty dismissing Sims’ hostile work environment claim.

First, her exposure to two brief scenes of nudity on a television in the drivers’ lounge cannot reasonably be perceived as hostile or abusive. … Considering all of the circumstances in the light most favorable to Sims, … she was simply not subject to severe or pervasive harassment.

And even if the brief incidents at issue here could somehow arise to objectively serious or pervasive harassment, Sims’s claim fails because there is no indication that she was subject to something to which male drivers were not exposed. The TV was on for all drivers, male and female, to see. The brief nude scenes were not directed at Sims because she was a female. Poor taste does not amount to prohibited sexual harassment.

And finally, … a Title VII plaintiff must also establish that her employer failed to take prompt remedial action when informed of the allegedly harassing behavior. Sims cannot make this showing here. The evidence, in fact, demonstrates the opposite: to a person, Sims’s managers responded to her complaints, attempted to comfort her, and took immediate action.

One employee’s television show is another’s harassment. And while this court almost certainly correctly concluded that a minute of nudity on a screen does not rise to the level of a hostile work environment, it’s nevertheless not a bad idea to take a stand against all nudity in the workplace so that you don’t end up in court making these arguments.

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Managing Mental Health Crises at Work

employers mental health; Millennials and mental health

Talking about suicide does not need to be taboo.employers mental health; Millennials and mental health

Mental Health America’s 2019 “The State of Mental Health” report has some concerning statistics. While adult prevalence of mental illness has been relatively constant, suicidal ideation, or suicidal thoughts, has increased from 3.77 percent in 2012 to 4.19 percent in 2017.

“That’s over 10.3 million adults in the U.S. with serious thoughts of suicide,” the report noted. Meanwhile, more than 10 million adults in the U.S. have an unmet need for mental health treatment.

Companies should understand how suicide could impact not only a person’s family and loved ones, but also their co-workers, clients and everyone around them, said Ali Payne, practice leader for organizational wellbeing at insurance brokerage Holmes Murphy.

“I think the way we make sure people feel connected is having a strategic relationship with leaders and having leaders be open about how it impacts them or how they do business,” Payne said. She suggested creating a work environment where open conversations are encouraged.

Leaders should educate themselves of the available resources and prepare themselves if a mental health crisis happens, she said.

Suicide is a significant public health issue both in the United States and worldwide. Between 1999 and 2016, suicide rates have increased in every state in the U.S., according to the Centers for Disease Control and Prevention. Further, the World Health Organization estimates that one person dies of suicide every 40 seconds worldwide.

“Our Global Suicide Crisis,” a 2019 report from Prudential, notes that while it’s understood that depression and anxiety can be precursors to suicide, there isn’t yet enough known about the many reasons behind suicide to prevent it. Still, addressing depression and anxiety can help.

One way to address mental health in the workplace is by adopting best practices such as telehealth for behavioral health and on-site mental health clinicians, the report notes. It also stressed that when an employee takes time off to deal with a mental health episode, managers should remain in contact with them. “This may not only help an employee through depression — it can also reduce their fear of returning to work,” the report noted.

Workplace benefits and policies like this are valuable, Payne said, but employers and managers can also learn about accessible community-based resources that address mental health. These resources include mental health services provided by and crisis hotlines, government organizations, state-based organizations and local hospitals and health providers.

“A lot of employers don’t always know what those resources are, and they sometimes take them for granted until they’re impacted by [a mental health crisis],” Payne said. “Then they might take the initiative to figure out what those resources are. But I always say, let’s be as proactive as we can and really try to get a handle on what [these resources] are even outside of what we’re buying today.”

Co-workers can also benefit from guidance in learning how to address what they think may be a mental health crisis in a colleague. It may not be a comfortable situation, Payne said, but part of the training she does for clients is based around understanding how to help struggling colleagues.

Productivity Expectations

One work reality that may impact an employee’s mental health is rising productivity expectations, Payne said. “Right now we’re all asking our people to do more with less,” she added, saying that employees are more often wearing many hats and pitching in wherever the company needs them. “We need to make sure we’re thinking about how workload impacts people.”

Even though employers understandably want employees to be their most productive selves, that’s difficult for an employee when they are having mental health problems. It’s an added stress as well if they still feel workplace pressure to be at maximum productivity even when they’re not feeling good, Payne said.

“If they’re feeling like this, they’re definitely not going to bring their whole self to work. They’ll leave a majority of what they need and what they want somewhere else,” she said.

She also suggests that team leaders learn to help people recognize when they’re not feeling 100 percent and when they need to take a break.

Personalizing Programs

“We can’t just say that mental health affects everyone the same way,” Payne said. Financial stress may negatively impact one person’s mental health while career stress may cause a similar reaction in someone else. There isn’t one simple solution to address this workplace issue.

“There’s no silver bullet to anything, and that’s what everyone wants,” she said. “Everyone wants this silver bullet that’s going to solve all the problems in mental health, like stress management.”

While stress management programs have some value, stress impacts everyone differently. People can improve their resiliency, but even so they may not be as resilient of a person as someone else, Payne said. Some people are just more resilient than others. Simply investing in programs meant to increase employees’ resiliency is not enough to address stress and mental health, she said.

Payne encourages her clients to consider all the resources they have at their disposal that can be impactful to different people with different needs who are struggling.

“It doesn’t mean that they’re struggling all the way to suicide,” Payne said. “It might just mean they’re struggling in general. How do we make it OK to not be OK?”

Further national, state and local resources:

Also read:

 

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Employers: Here’s How to Avoid Getting Bitten by COBRA

COBRA benefits provide continued group health plan coverage after certain qualifying events, like termination of employment, and are a health care safety net for employees until benefits from a new job kick in.

But for employers, staying compliant with COBRA regulations can be difficult. Sure, COBRA — the Consolidated Omnibus Budget Reconciliation Act health insurance program that allows an eligible employee and their dependents the continued benefits of health insurance coverage — is for employees who no longer work at your company.

Since you might think of them as long gone, complying with COBRA might not be a priority. However, any employee who leaves on bad terms may be more likely to file a lawsuit against an organization if it mishandles COBRA. In fact, employers have recently seen an increase in the number of COBRA lawsuits filed against them for leaving out required information.

Outside of litigious former employees, COBRA is generally confusing to comply with and can carry heavy penalties for employers. These can add up — courts can assess up to a $110 per day penalty for each deficient COBRA notice per person.

Here are some commonly overlooked details.

Not understanding if your organization is subject to COBRA; not understanding eligibility. First, it’s important to understand which employers have to offer COBRA. The federal law says that employers with at least 20 employees in the prior calendar year must offer COBRA coverage starting the day employer-sponsored group health plan coverage ends. COBRA coverage can last up to 18 months under typical circumstances, or 36 months if certain events occur, e.g., the employee becomes entitled to Medicare, gets divorced or dies.

But it’s not enough just to follow the federal law. Employers often overlook that states can also mandate that group health plans offer continuation coverage much like COBRA — called “mini-COBRA” laws — that typically affect smaller employers and provide greater benefits to employees than the federal COBRA law. For example, the New York “mini-COBRA” law mandates 36 months of continued coverage for employers with fewer than 20 employees. In New Jersey, with some exceptions, the state’s mini-COBRA law applies to employers that employ between 2 and 50 eligible employees, and provides employees with:

  • 18 months if an employee is terminated or their hours are reduced
  • 29 months if an employee becomes disabled
  • 36 months for the dependent spouse or child of an employee who dies; goes through a divorce, legal separation, dissolution of a civil union or domestic partnership or otherwise loses dependent status.

Many other states have continuing coverage laws in place as well. And as if understanding the state and federal laws that apply to your employees isn’t enough (and, it can be especially difficult if your employees live in multiple states) — there are also time-sensitive deadlines you must meet in order to stay in compliance with COBRA laws.

Not Complying with Notice Guidelines

One issue that’s landed some employers in hot water is failing to send notifications, or not including the right information in these notifications. Let’s start with the basics—employers that sponsor group health plans must send an “initial notice” or “general rights notice” to covered employees and their covered spouses within 90 days of the date that coverage under the plan starts or, if later, the date that is 90 days after the date when the plan first becomes subject to COBRA.

In addition, and with some exceptions, once an employee separates from the company, the plan administrator (or employer, if the employer and plan administrator are the same entity) must send a COBRA “election notice” within 14 days of receiving notice of a qualifying event, such as being terminated from employment or leaving the company. This notice describes the employee’s rights to elect COBRA.

For both types of COBRA notices, the penalty for not doing this (i.e., in addition to the potential litigation costs) is up to $110 per day.

The Department of Labor outlines exactly what should be included in these notices and even supplies templates called “model notices” to help employers comply with these guidelines.

Not Understanding What’s Covered

COBRA allows employees to pay for the same group health plan coverage they enjoyed during employment — but at their own expense. Unless the employer agrees to pay for all or a part of the COBRA premium, employees are responsible for the full premium amount (plus a 2 percent administration fee). Under COBRA, the term “group health plan” coverage is defined broadly, and includes medical coverage and, depending on plan design, could also include prescription, vision and dental coverage. Life insurance, long-term care insurance and other similar types of insurance aren’t considered “medical coverage” and aren’t included in COBRA.

Health reimbursement accounts, or HRAs, qualify as group health plans, so employees must still offer reimbursement for their expenses under COBRA. Health FSAs are generally included within the definition of “group health plan” and are subject to COBRA, unless the account is “overspent” as of the date of the qualifying event. In such cases, an employer’s COBRA obligations are more limited.

COBRA, Severances and Mergers

One frequently asked question is how COBRA works with severance packages. It’s not uncommon for employers to pay employees’ COBRA health insurance premiums on a pretax basis for a few months as part of a severance package. But if the employee is considered “highly compensated” by the IRS, and the employer’s health insurance plan is self-insured, the employee may be subject to paying tax on COBRA coverage as required under certain nondiscrimination rules under Section 105(h) of the Internal Revenue Code, which generally require that a self-insured employer can’t discriminate in favor of highly compensated employees. Employers can avoid this issue by paying the employee for their COBRA premium on an after-tax basis.

Another point of confusion is how COBRA is administered during a company merger or acquisition.

There are a number of issues to consider, including what type of acquisition, sale or merger a business goes through, and the employee’s status as a result of that event. These factors determine which entity in the M&A deal pays for COBRA, and which employees are eligible unless the parties to the deal have memorialized these terms in their relevant asset purchase or stock purchase agreement.

How to Stay Compliant

Managing COBRA properly can be onerous. Often employers fall into one of three categories when it comes to administering COBRA benefits:

  • Managing it in-house.
  • Relying on a broker.
  • Relying on a COBRA specialist.

Whether your organization takes on administering COBRA in house or relies on your insurance broker or other COBRA specialist, the potential liability for getting COBRA wrong is significant.

Harrison Newman is vice president and benefits consultant for Corporate Synergies.

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Google Cloud Hires McInnis-Day as New VP of HR

Brigette McInnis-Day has been named Google Cloud’s new vice president of HR.

Brigette McInnis-Day, vice president of HR, Google Cloud.
Brigette McInnis-Day, vice president of HR, Google Cloud

Bringing over 20 years’ experience, McInnis-Day previously worked as chief operations officer and head of the digital HR strategy and transformation teams at SAP Successfactors, one of the world’s largest cloud-based human capital management providers.

As COO, she defined and implemented business strategies that were needed to achieve sustainable growth and customer satisfaction across SAP Successfactors’ largest cloud organization. She was committed to establishing the right goals, culture and vision, and bringing them to life to effectively support 6,500-plus global customers.

While managing board level HR and digital transformation strategies, McInnis-Day also led global organizational change and redesign and consulted senior level executives. According to a press release from Google, she enjoys amplifying employee experiences, revamping compensation elements and stimulating people development. She is also passionate about working to build cultures that promote women and early talents in leadership, diversity and inclusion, pay equality and digital transformation, the release stated.

Aside from the workplace, McInnis-Day is also an author, speaker and contributor for several publications, including the World Economic Forum Agenda, Fortune, Forbes, HRExecutive and other innovation forums. She enjoys spending her free time with her family, and describes herself as a travel and fitness enthusiast, the press release stated.

Google Cloud is a suite of public cloud computing services offered by the search engine giant. It includes a variety of hosted services for compute, storage and application development that run on Google hardware. Google Cloud can be accessed by software developers, cloud administrators and other business IT professionals.

Also read: Taking a Page From the Gig Economy to Ease the Recruiting Process

As stated on its website, “Google Cloud is widely recognized as a global leader in delivering secure, open, intelligent, and transformative enterprise cloud platform.”

Taking on her new position at Google Cloud, McInnis-Day will continue to lead large-scale, global teams and help individuals succeed through innovation by overseeing HR with a focus on acquiring and developing talent and shaping the culture to drive business growth and transformation.

The release noted that she is looking forward to playing an active role among the growing Google Cloud talent pool.