Author: Site Staff

As public outrage over executive compensation intensifies, experts believe there will be an increase in whistle-blower lawsuits filed by employees alleging they were fired for opposing their executives’ compensation packages.

Two such lawsuits were filed in March—one involving Citizens Republic Bancorp, a Flint, Michigan-based bank that has been approved to receive $300 million in bailout funds through the Troubled Asset Relief Program, and the other against McDonald’s Corp.

Experts say that given the heightened scrutiny regarding executive compensation, particularly in the wake of President Barack Obama’s opposition to bonuses given to AIG executives, more lawsuits are coming.

“Employees are feeling more empowered to report corporate fraud because they recognize the consequences of upper management ignoring fraudulent activity,” says Jason Zuckerman, a principal at the Employment Law Group, a Washington-based firm that represents whistle-blowers. “If management hadn’t ignored employees’ efforts to blow the whistle, then the current economic crisis might not be as severe as it is today.”

According to the March 24 lawsuit filed against Citizens, John D. Schwab, the bank’s former executive vice president and chief credit officer, says he was fired because he opposed a request by then-CEO William Hartman for a $7.5 million bonus, stating that it was “wrong and inappropriate,” particularly since the bank was applying for bailout funds.

After Schwab expressed his concerns, the bank’s board terminated Hartman’s employment. But, according to the suit, Hartman fired Schwab before he left the bank.

Similarly, on March 26 Lisa Bridges, McDonald’s former senior director of compensation, filed a suit in federal court stating she was fired after refusing to certify some executive compensation disclosures in the company’s 2007 proxy statements.

Among the issues that the suit says Bridges opposed were McDonald’s failure to disclose that it had paid for two country club memberships, totaling $3,000, for Tim Fenton, president of the company’s Asian operations.

Given the economy, companies receiving TARP funds are particularly vulnerable to whistle-blower lawsuits, says Mike Behn, a partner at Chicago-based Behn & Wyetzner.

“There is a high degree of public outrage about the use of taxpayers’ money to fund executive compensation,” Behn says.

But this issue will spread beyond companies receiving bailout funds, experts say.

“Even in nonpublic companies, boards of directors are under pressure to increase accountability and oversight over the executive compensation process,” says James Hostetler, managing director of McBride Associates, a Washington-based consulting firm that works with boards on governance issues.

While many employers have claimed they must pay executives large amounts to recruit and retain them, that argument is losing strength, Hostetler says.

“I would hope that HR is thinking about better ways to compensate top executives, but also about how to create a safe haven for employees to report these problems,” he says.

—Jessica Marquez

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While supporting improved retirement plan fee disclosure, the head of the Investment Company Institute said Wednesday, May 6, that congressional criticism of 401(k) plan fees has been inflated by critics.

“What they don’t mention is the long list of services that 401(k) plans provide,” including investment management and record keeping as well as legal services, audits, Web sites, call centers and participant education, John Murphy, chairman of the Investment Company Institute, said in a speech to about 800 mutual fund executives at the group’s general meeting in Washington.

Legislation introduced by House Education and Labor Committee Chairman George Miller, D-California, would require more disclosures of 401(k) fees.

In response to charges that plan fees are too high, Murphy cited a recent ICI-sponsored survey which showed that total fees for the plans were 0.72 percent of assets, “quite a bargain compared to the 3 percent that some critics cite.”

He also said that “disclosure is not just about fees,” adding that reports should include information on risks, performance and investment objectives.

Disclosures, however, must be useful, and they should not overwhelm sponsors and participants “with data that they don’t need,” Murphy said.

Because the mutual fund industry manages half the assets of U.S. defined-contribution and individual retirement accounts, it has “a duty to speak out in defense of America’s private, employer-based retirement system,” said Murphy, who is also chairman of New York-based OppenheimerFunds Inc.

The fund industry wants to make it easier for employers to offer retirement plans and easier for workers to save even if they don’t have a plan, he said, noting that automatic enrollment and auto escalation, which increase participant contributions as their salary rises, should be considered.

The $10 trillion mutual fund industry, which manages the retirement savings of 46 million U.S. households in defined-contribution plans and IRAs, “has a large stake in ensuring that policymakers understand the workings and the importance of today’s savings vehicles,” Murphy said in the opening session of the meeting.

He cited an ICI survey of 3,000 households conducted last fall that showed strong support for keeping tax breaks for defined-contribution plans and IRAs, as well as strong opposition to barring people from making their own investment decisions in the plans.

Murphy also called for adoption of money market reforms suggested in an ICI report issued last year after the Reserve Primary Fund from New York’s Reserve Management Co. Inc. “broke the buck.”

He called on the Securities and Exchange Commission to authorize money market fund boards to suspend redemptions of fund shares temporarily for funds facing spiraling redemptions, if the fund is unable to meet them, and a permanent suspension of redemptions for funds preparing to liquidate.

Reflecting the downturn throughout the financial services industry, attendance at the ICI annual meeting was about 40 percent below last year’s level, said Greg Ahearn, spokesman for the Washington-based association.

This year’s meeting “takes place against a very different backdrop than when we last met,” said William McNabb, president and chief executive of The Vanguard Group Inc. of Malvern, Pennsylvania. In light of the $2.4 trillion drop in assets last year, investors are questioning whether mutual funds are a sound way to save for retirement, he said.

“Our response has been one of steadfast commitment to our shareholders,” which sets the fund industry “apart from the rest of the troubled financial sector,” McNabb said.

Filed by Sara Hansard of Investment News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Nearly four out of 10 Americans—or 39 percent—said they expect it’ll take at least three years to recover the value of their retirement savings that were lost in the downturn.

A full 20 percent believe the recovery will take less than three years, but 24 percent predict a full recovery of losses will take at least six years. Only 4 percent expect their savings to recover by 2010.

The remaining 13 percent weren’t saving for retirement, according to a survey from St. Louis-based Edward D. Jones & Co.

The survey also found that people’s expectations of the market recovery differed based on their background.

For instance, it showed that middle-aged Americans anticipate that it will take them longer to recover, compared with the overall sample.

Fifty-four percent of Americans ages 45 to 54 believe it will take more than three years to recover from losses in retirement savings.

Meanwhile, the study showed that 45 percent of Hispanics expect it will take longer than three years to recover their savings, compared with 35 percent of African-Americans.

According to the survey results, 52 percent of respondents who earned $75,000 to $100,000 believe it will take more than three years to recover their retirement savings, compared with 25 percent of individuals who earned less than $35,000.

“No one can predict when the market will recover,” Alan Skrainka, chief market strategist at Edward Jones, said in a statement.

“If you look at similar declines in the stock market, the average recovery is two-thirds in two years, and full recovery in five years. [But] history is not always a guide, and this recovery could take longer.”

The survey was based on 1,000 telephone interviews of U.S. adults conducted April 23-26.

Filed by Lisa Shidler of Investment News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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A bidding war over HR software firm SumTotal Systems intensified Wednesday, May 6. And it may not be over.

Private equity firm Vista Equity Partners upped the price it said it would pay for the learning software provider to $4.50 per share, or a total of $146 million.

That bid leapfrogs the $124 million offer made by private equity firm Accel-KKR in late April. Vista Equity Partners, which already owns about 13 percent of Mountain View, California-based SumTotal, originally proposed paying $3.25 per share for SumTotal on April 3. SumTotal shares traded at $2.01 just before Vista’s first offer.

Pat Walravens, equity analyst at investment firm JMP Securities, says the final price for SumTotal could be higher.

“Vista didn’t say this was its best and final offer, and we know that Accel KKR was willing to pay $7 per share last September,” Walravens wrote in a report Wednesday, May 6. “So the bidding process may continue.”

In a statement Wednesday, SumTotal said its board will review the new Vista offer.

SumTotal sells learning management systems and other talent management tools. Such products have been among the fastest-selling business software applications, but the recession has slowed sales.

Research firm Bersin & Associates initially forecast that talent management software spending would rise 20 percent in 2008 to $2.3 billion. But the final tally was just shy of $2 billion, representing 16 percent growth. For 2009, Bersin predicts a rise of about 14 percent to $2.26 billion.

SumTotal, whose customers include JPMorgan Chase, Kia Motors and Halliburton, announced a first-quarter net loss of $5.2 million, compared with net income of $1.5 million for the first quarter of 2008. Revenue fell 34 percent year-over-year to $23.7 million. Its stock, which is traded on the Nasdaq, closed up 19 percent Wednesday at $4.58.

SumTotal has been working to shift its business model from a focus on traditional software license sales to more of an emphasis on “software as a service,” which involves delivering applications over the Internet and charging subscription fees.

Vista has said it believes “the present management team lacks the requisite experience to effect a SaaS transition.” Vista, with offices in San Francisco and Chicago, also has said that current stockholders “have had little choice but to retain their positions” in SumTotal.

Last month, Vista said SumTotal refused to meet to discuss its initial bid. Vista also nominated three people to be elected to SumTotal’s board.

On April 24, SumTotal said it had agreed to be acquired by affiliates of Accel-KKR, which has offices in Menlo Park, California. But that agreement has a provision allowing SumTotal to solicit alternative proposals until May 24.

In a recent public filing with the U.S. Securities and Exchange Commission, SumTotal said that last year Accel-KKR “provided an oral indication of interest to acquire the company at $7 per share.”

Escalating offers for SumTotal are good news for the overall HR software industry, according to Josh Bersin, head of research firm Bersin & Associates.

Vendors have access to more capital, buyers benefit from more sustainable vendors, and investors feel more comfortable with the industry, he wrote in a recent blog posting.
 
“This is a very positive thing, both for SumTotal as well as for the general HR software marketplace,” Bersin wrote in late April.

—Ed Frauenheim

Enforcement on illegal immigration will shift toward employers and away from undocumented workers in the wake of a recent Supreme Court decision and a policy change by the Department of Homeland Security.

On Monday, May 4, the court ruled that an immigrant could not be charged with aggravated identity theft if he wasn’t aware that he was using a U.S. citizen’s information.

Just days before, on April 30, the DHS issued new work-site enforcement guidelines targeting employers. They represent a pivot away from the Bush administration’s approach to factory and office raids. Critics assert the Bush efforts snared illegal workers without clamping down on the companies hiring them.

In May 2008, the DHS arrested 389 illegal immigrants at an Agriprocessors meat plant in Postville, Iowa, charging 306 with aggravated identity theft, which carries a mandatory two-year prison term.

In the Supreme Court case, Carlos Flores-Figueroa, a worker at an Illinois steel plant, in 2006 presented documents with his name but false identification numbers. He pleaded not guilty to aggravated identity theft because he claimed he didn’t know he was stealing real Social Security data. He also pleaded guilty to another immigration charge.

A district court convicted Flores-Figueroa, and the decision was upheld by the 8th Circuit Court of Appeals. The Supreme Court overturned the aggravated identity theft.

Violating the statute requires that an offender “knowingly … uses, without lawful authority, a means of identification of another person.” The government argued that “knowingly” didn’t pertain to the identity theft portion of the law.

On behalf of his colleagues, Justice Stephen Breyer wrote, “As a matter of ordinary English grammar, it seems natural to read the statute’s word ‘knowingly’ as applying to all the subsequent elements of the crime.”

The new DHS work-site guidelines also turn the enforcement spotlight away from workers.

“Effective immediately, ICE [Immigrations and Customs Enforcement] will focus its resources in the work-site enforcement program on the criminal prosecution of employers who knowingly hire illegal workers in order to target the root cause of illegal immigration,” DHS said in a fact sheet.

The agency said that in fiscal 2008, under the Bush administration, only 135 out of 1,100 criminal arrests involved “owners, managers, supervisors or human resources employees.” Another 5,100 administrative arrests were made.

“The DHS under new leadership is trying to do sensible reform,” said Doris Meissner, former commissioner of the U.S. Immigration and Naturalization Service and now a senior fellow at the Migration Policy Institute. “It’s a course correction that’s needed.”

Currently, verification is not mandatory. The government-run electronic system E-Verify is derided by the Society for Human Resource Management as inefficient, ineffective and unable to detect identity theft.

The lack of a foolproof verification system means that DHS work-site raids will erroneously target some employers, said Hector Chichoni, chair of the immigration practice for the southern region at Epstein Becker Green in Miami.

Nonetheless, Chichoni urges companies to rigorously follow hiring laws.

“They better put their compliance houses in order,” Chichoni said. DHS is “going to make an example of a lot of people.”

—Mark Schoeff Jr.

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Risk managers around the globe are working to reduce the risk to their organizations of a possible influenza pandemic by doing everything from offering basic advice on avoiding infection to ensuring that business continuity plans are in place.

As they closely monitor information from international health authorities about the spread and severity of the virus, risk managers have begun implementing procedures and plans that, in many cases, were developed in response to the avian flu and SARS threats earlier this decade.

Wayne L. Salen, director of risk management at Labor Finders International Inc. in Palm Beach Gardens, Florida, said the industrial temporary staffing company is sending employees the latest information from health authorities and reminding its customers to alert the company if a temporary staffer is ill.

If a temporary staffer shows symptoms of swine flu—or H1N1 flu—the company is encouraged to send the employee directly to the emergency room, he said.

He also said the company’s system allows managers to operate branches from remote areas, should an outbreak occur.

Past pandemic scares allowed firms to test their response procedures and see what worked and what didn’t, said Lance Ewing, vice president of risk management at Harrah’s Entertainment Inc. in Memphis, Tennessee.

“Three years ago, most of us [saw] a trailer of this same movie and it was known as avian flu,” he said.

The most prominent lesson from the avian flu threat was the importance of educating employees about universal precautions like hand-washing and seeking medical attention if they exhibit symptoms of the flu, Ewing said.

Harris County, Texas, is following the lead of public health authorities in advising employees about the specific symptoms of swine flu and sanitary measures to limit its spread, said David Kester, risk management director for the county in Houston.

In addition, the county has modified a policy that mandates employees out of work for more than four days provide a note from a physician; for flu-like symptoms, that threshold has been extended to six days. Public health authorities have expressed concern about a flood of patients overwhelming physicians and hospitals and the county does not want its sick leave policy to contribute to the problem.

“We don’t want [employees] to say, ‘Gosh, I need to go get a doctor’s note or I won’t get paid,’ ” he said.

Ewing said risk managers should check with their insurers to see to what extent business interruption, workers’ comp and liability policies cover flu-related losses.

“This is not the time to dust off the Bible and figure out which verse applies,” he said. “You should probably know ahead of time.”

Harrah’s is monitoring any employees traveling on business to affected countries, Ewing said.

Business continuity plans
Continuity plans are occupying risk managers everywhere.

Risk managers have a vital role to play in ensuring that their companies have business continuity, human resources and disaster recovery plans in place to deal with a pandemic such as a flu outbreak, said Franck Baron, a director of the Federation of European Risk Management Associations and head of international relations at the Swiss Association of Insurance and Risk Managers.

Risk managers may need to check whether their company has stocks of antiviral drugs, gloves and masks, for example, he said.

Katoen Natie swiftly enacted its existing pandemic plan—with adaptations—in its Mexico City and Texas operations, said Carl Leeman, chief risk officer for the Antwerp, Belgium-based logistics, storage and distribution company.

The company, which has had no staff members fall ill, has taken several preventive measures, Leeman said. For example, staff telephones, keyboards and door handles are cleaned several times a day, truck drivers are no longer allowed inside offices, and commercial staff has been asked not to travel.

Businesses must have business continuity plans in place to deal with a pandemic outbreak, said Marg Hemsley, president of the Western Australia chapter of the Risk Management Institution of Australasia Ltd. “Organizations must focus on protecting their workers and business continuity planning to ensure critical functions and services are maintained.”

Hemsley was involved in Western Australia’s preparation for an avian flu pandemic and said that while businesses in the region were well-placed to respond, they needed to guard against complacency.

“In discussing the bird flu epidemic, many businesses thought they would not be affected because they didn’t deal with birds. There is a risk of the same attitude” with swine flu, she said.

One potential outcome of a pandemic for which businesses must be prepared is a lack of available staff, she said. Employees who are not sick but who live a long way away from the workplace or those whose children’s day care facilities have been closed because of a flu outbreak, may not be able to come to work, she said.

Risk managers should ask themselves what effect absenteeism would have on their businesses and what effect staff shortages at suppliers or customers could have on the operation, she said.

Risk managers should monitor the World Health Organization Web site, www.who.int, said Julia Graham, chief risk officer at law firm DLA Piper in London and chair of the Association of Insurance and Risk Managers.

“The first thing people should do is monitor the phases,” she said. “Then look to your business continuity plans according to those phases,” she said.

When the WHO preparedness level reached phase 3, risk managers should have made sure that their plans were up to date, Graham said.

When that level reaches 5, as it did last week, business continuity plans typically would be triggered and moves such as travel restrictions should be implemented, she said.

Filed by Zack Phillips and Sarah Veysey of Business Insurance, a sister publication of Workforce Management. Business Insurance senior editor Mike Bradford contributed to this report. To comment, e-mail editors@workforce.com.

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Dear Pay for Performance-Minded:

In any incentive plan design, the key issue is always the design of the performance measures. Regarding the structure of typical compensation schemes, your company should review client-performance metrics to understand and effectively address new projects, new clients, and client-relationship management.

Developing effective performance measures necessarily entails understanding client-relationship metrics that are truly important to the business from a strategic standpoint. Design the measures so as to both motivate individual participants and achieve desired company results.

In a professional services organization, project deliverables, client satisfaction and quality of work are generally considered to be critical measures of performance, as the quality of client relationships can make or break the firm. Since client-relationship management is typically team-oriented, incentive plans will also incorporate objectives based on team achievements.

Typical performance measures might include:

• Productivity on client projects (performance to project budget, deliverables, resource allocation).

• New business development (revenue generation).

• Client satisfaction (quality and timeliness).

• Contribution to profit.

• Consider paying based on revenue achieved versus hours, since hours may be charged at different amounts by project or client.

A second critical component of any program is the determination of payout levels. Most organizations with formal plans set what are called “target” levels of payout. These targets can be expressed as a percentage of base pay, as a fixed or varying dollar amount, or as a percentage of an incentive pool of dollars.

Target payouts are usually determined from an analysis of total cash compensation in the marketplace, as management is looking to keep total pay competitive. This requires a defined comparator market, as well as a defined compensation position. (Example: “Our company will set pay levels at the 50th percentile of the competitive market for base salary, and at the 75th for total cash compensation.”) Payout potential usually varies by level in the organization.

In addition, upside potential and downside risk also need to be addressed. This process includes establishing maximum payouts and setting payout thresholds where payouts are zero below a certain level of company performance.

Some organizations use uncapped plan payouts, although we certainly do not believe this is appropriate in all programs. Are rewards highly leveraged—that is, does the payout increase substantially when a person’s performance exceeds the set objective? Or do payouts increase more moderately?

Uncapped awards are usually reserved for sales incentive plans.

Finally, consideration should be given to the issue of leverage.

Here are typical considerations for developing incentive targets as well as payout leverage mechanisms:

• Consider anticipated/forecasted business and historical prior year actual results.

• Determine the percentage of revenue attributed to each business line.

• Use revenue goals by business line, set revenue goals per person.

• Set goals quarterly or semiannually; acknowledge management’s right to adjust as the company reforecasts the upcoming three to six months.

• Consider whether to start incentive pay for achieving a threshold level less than goal and up to targeted goal and above.

As you can see, incentive programs require a substantial amount of analysis and design work. Done properly, this type of compensation can be designed to directly support the overall business goals of the firm, and can provide for appropriate and effective employee motivation.

SOURCE: Robert J. Fulton Jr., managing director, The Pathfinder’s Group Inc, Chicago, April 30, 2009

LEARN MORE: Paying for performance is useful for many organizations but not for all.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Workforce Newsletter

Dear Getting Emotional:

The first thing that is important to consider is the difference between a test and an interview. While tests and interviews are held to the same basic legal requirements, they are very different animals. A test is made up of questions that have been verified and statistically proved to predict a specific outcome (such as emotional intelligence). Tests used for employment should be developed in a manner that provides many different types of data, all demonstrating that questions on the test predict the construct of interest.

Interviews are a bit looser in nature. They rely on fewer questions that tend to be more open-ended. Interviews are often oriented toward the discussion of work-related behaviors and accomplishments that indicate whether an applicant displays certain key competencies.

The common link between these two types of hiring tools is the fact that, to be both legal and effective, they must directly measure key traits required for successful job performance. This means that anytime you are considering measuring a trait such as emotional intelligence, via either an interview or a test, you must first take steps to demonstrate that it is clearly job-related.

This can be accomplished in many ways, the most common being a job analysis study. EI describes the ability to be “self-aware” in work-related situations and to react to them in ways that demonstrate an awareness of how your actions affect others. It is an important trait for teamwork and leadership behaviors. There are many ways to measure it, and the method you choose to employ depends on other aspects of your hiring process and the job itself.

In your situation, you have the option to use either an interview or a test. If you use an interview, you should be certain that it is a standardized, structured, behavioral interview that uses work-related questions to determine how an applicant may have handled specific problems in the past.

The scoring for these questions should be broken down into options that indicate different levels of EI. If you use a test, the test should be one that has been documented to measure EI, as it relates to the impact it has on performance at the job in question. You should ask any company providing your EI test to provide documentation that proves it has been effective in the past in similar jobs.

You should use a test that has a good pedigree for measuring EI in jobs similar to yours. It is probably easier to do this than to attempt to make up interview questions that you believe measure EI or to make changes to your interview process. Furthermore, my experience with EI has found it to be most frequently measured using tests as opposed to interviews.

Just remember: Any vendor that cannot provide documentation to prove the statistical work in creating/validating tests is probably not your best bet.

SOURCE: Charles A. Handler, Rocket-Hire, New Orleans, June 6, 2007



LEARN MORE: Please see Making Emotional Intelligence Work for more on tying EI to job competencies. Also, a good description of EI is found here.



The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Workforce Newsletter

As fears grow about the swine flu outbreak, being prepared and avoiding panic are two of the most important steps risk managers can take, according to experts.

Contingency plans need to be reviewed and updated. Issues such as supply chain security and workplace attendance policies should be addressed. Travel policies also demand attention.

Most important, businesses should ascertain just how much they would be affected if a significant portion of the working population is sickened by swine flu—which is also known as H1N1 flu.

“Anywhere up to 30 percent of their employee base may be out at some point in the pandemic,” said Jeanne A. Matthews, assistant professor of nursing at Georgetown University School of Nursing & Health Studies in Washington and immediate past chair of the Public Health Nursing Section of the American Public Health Association.

“For business, this is not just a public health problem; it’s a problem of the economy as a whole,” she said. “There are supply chain issues if you think about potentially 30 percent of the employees in all businesses being affected. We need businesses to think about what happens if their vendor is affected. Do they have a Plan B in terms of meeting their own needs, and looking forward how do they meet the needs of their customers?”

Review existing plans
For many risk managers, the first action will be to review existing pandemic plans, experts say.

Risk managers “are really assessing the plans they put in place a few years ago around the avian flu because the issues and the approaches are not dissimilar,” said Prakash Shimpi, managing principal and head of Towers Perrin’s corporate enterprise risk management practice in New York. “The challenge perhaps is for companies who had not had the opportunity to put some plans in process.”

Risk managers should be “checking into the contingency plans that have been put into place already,” said Mike Giacobbe, director of enterprise risk management for Aon Global Risk Consulting in Chicago.

“Hopefully, there’s been some preplanning done at the organization for this particular event,” he said.

Aon recommends that employers determine availability of backup suppliers to ensure supply chains are uninterrupted; review succession planning; create a process for sending critical messages to employees; develop a protocol for working from home; inform employees of any travel restrictions; and construct a plan of action should an employee be suspected of having an H1N1 flu infection.

Many educational institutions have planned for a pandemic, “and if they haven’t then they’ve been negligent in not doing so,” said Leta Finch, executive director-higher education practice group for Arthur J. Gallagher Risk Management Services in Burlington, Vermont. “The world has known about this risk of a pandemic outbreak for years now.”

Giacobbe stressed the need for a “unified response” to avoid miscommunication and conflicting messages. Risk managers also need to keep up with the latest information from the World Health Organization and Centers for Disease Control and Prevention, he said.

A pandemic will not affect all industries equally, said Carl Groth, director at Deloitte & Touche in Wilton, Connecticut. High-impact industries could include travel such as airlines. The hospitality industry, particularly resort areas, also could be affected, he said. Health insurers would be affected and, for life insurers, “pandemic is always at the top of their mind.”

Safety precautions
A company should “look at its own business model, its own demographics and consult with someone who knows something about public health,” said Don Dowling, international employment counsel at White & Case in New York.

Considerations include taking workplace safety precautions like washing hands,” Dowling said.

“Then you’d have a provision on the cluster of issues involving people not showing up to work,” he said.

These issues would include whether the employer can force people to work from home and whether employees can be forced to take paid leave or unpaid leave. The company also would need a disaster communications protocol, he said.

“There are steps that we can take even at this early stage of the outbreak to prevent exposure and to prevent even getting the flu if you are exposed,” said Jeff Tanenbaum, a partner and labor and employment practice leader in Nixon Peabody’s San Francisco office.

For example, employers should mandate universal precautions, said Tanenbaum in an article he posted at the Nixon Peabody Web site. These include frequent hand washing, and because access to soap and water is not always convenient, ready access to a hypoallergenic hand sanitizer should be provided.

The precautions also should minimize exposure to people who are ill.

Employees who appear ill when they are at work should be sent home. And, when employees are ill, they should be encouraged, or perhaps required, to stay home.

Supply chain management also critical
Businesses “need to get a full view of their supply chain for the products that are most important to their business,” said Gary Lynch, managing director in Marsh’s New York office.

They need to identify every aspect of the supply chain, from suppliers to public infrastructure that could be negatively affected by pandemic flu. And remember the human element, he said.

“Without people, we don’t have a supply chain.”

“Any sort of overreaction is extremely dangerous where arbitrary decisions are being made to shut down facilities,” Lynch said.

That’s true on many levels, said Nixon Peabody’s Tanenbaum.

It’s important “not to panic yourself as an employer and to do what you can to prevent employees from panicking. The best thing you can do is to educate yourself and to educate your workforce,” he said.

“The reassuring part is you can do something and we’re still talking the very early stages of an outbreak,” he said. “We don’t know it’s going to become worse—it may. I think most medical professionals are assuming it will become worse, but how much worse we don’t know yet.”

TOOL: Swine Flu Resources for Workforce Managers

Filed by Mark A. Hofmann of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The drive to draft and enact comprehensive health care reform legislation is on track, the chairman of the Senate Finance Committee said.

“We are on schedule,” Sen. Max Baucus, D-Montana, said last week, adding that his committee will begin consideration of a reform bill in mid-June.

“The serious stuff” is about to begin, added Sen. Charles Grassley, R-Iowa, the committee’s ranking Republican member.

As the committee prepares to draft legislative language, Sen. Baucus noted that final decisions on a wide array of issues remain to be decided.

“So, everything’s on the table: all the concepts, all the ideas,” he said.

“I’m telling everybody to suspend judgment, even if for a nanosecond. If there’s something you don’t like, just suspend judgment. Just cool it. Just keep your powder dry,” Sen. Baucus said.

While final decisions have yet to be made, Sen. Baucus has hinted at the shape of some of the provisions.

As of now, he is supportive of the approach Massachusetts took in its 2006 reform law in which the low-income uninsured can get coverage from private health insurers offering policies through an exchange that is administered by a state agency.

“That’s basically what we are thinking about in our plan,” he said.

“We’ll set up a system similar to Massachusetts where an individual looking for health insurance can go to the exchange and get health insurance from a health insurance company who is offering insurance on that exchange,” similar to the way federal employees can shop for coverage, he said.

The panel chairman said he has no intention of interfering with the way self-funded employers provide coverage to employees.

“The system I envision is one where self-insured companies … can keep their own plans and manage health insurance in the way they have. We’re not going to change the way self-insured companies handle health care for their employees,” he said.

That approach is very different from the one the Clinton administration tried to pursue in 1993 when it called for dismantling the employment-based system in favor of coverage through public purchasing cooperatives. Congress rejected that approach.

The hints that Sen. Baucus has dropped are comforting, benefit lobbyists say.

Sen. Baucus and other key leaders in Congress “realize the vast majority of people are satisfied with the coverage they receive from their employers. There is no point taking away from people with what they are content,” said James Klein, president of the American Benefits Council in Washington.

“At this point, we are encouraged,” added Michael Ferguson, COO of the Self-Insurance Institute of America Inc. in Simpsonville, South Carolina. Ferguson said the SIIA has spent a lot of time educating members of Congress and staff on the role self-funded employers play in providing coverage.

Aside from wanting to keep employers and insurers as purchasers and providers of coverage, respectively, the reform approach being taken by Sen. Baucus differs in other major ways from the Clinton strategy.

It is clear, for example, that this time around Congress is taking the lead, with input from the Obama administration in drafting legislation. By contrast, the Clinton administration shut out Congress, with the result that members felt no ownership with the Clinton plan and quickly spurned it.

“This is the way most legislation is drafted. The president gives an outline and leaves it to Congress to develop the specifics,” said Klein, referring to the reform drive.

“Many of the players involved in 1993 and 1994 are around today and have learned from the mistakes that were made then,” said Frank McArdle, a consultant with Hewitt Associates in Washington.

Still, as McArdle notes, there are plenty of political minefields ahead. Reform leaders face tough and sensitive decisions on such issues as whether employers should be mandated to offer coverage, whether individuals must be enrolled in a health care plan, and how to pay for an expansion of coverage.

“The critical and most controversial issues soon will be coming to fore,” Klein said.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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