Author: Site Staff

A regulation requiring all federal contractors to use a government-run electronic employment verification system has been delayed until May, giving the Barack Obama administration time to review a proposal that has drawn strong resistance from employers.

The rule was issued in its final form on November 14 and was set to go into effect January 15. But several business groups—including the U.S. Chamber of Commerce, the Society for Human Resource Management and the HR Policy Association—filed a suit in late December to block implementation.

The government agreed to push back the advent of the new rule to February 20. In the Friday, January 30, Federal Register, implementation was delayed to May 21.

The interval will allow new Department of Homeland Security Secretary Janet Napolitano to take another look at the rule. She was confirmed by the Senate last week.

“I think it is a positive sign that they’re rethinking whether this is the best way to go,” says Nancy Hammer, SHRM manager of regulatory and judicial affairs.

Under the regulation, companies that win a federal contract of more than $100,000—and subcontractors with contracts of greater than $3,000—would have to enroll in E-Verify, the electronic verification mechanism, within 30 days of being awarded the work.

The firms would have to check the eligibility of existing and new employees who directly work on federal contracts. The regulation was first issued as an executive order by President George W. Bush in June. E-Verify was the centerpiece of his administration’s efforts to step up work-site enforcement.

Currently, about 100,000 companies use E-Verify. The contractor rule could add at least 150,000 employers.

The business groups sued to stop the rule because they assert that the homeland department lacks authority to make E-Verify mandatory when Congress established it as a voluntary program.

They also claimed that it was unconstitutional to reverify employees who had already been cleared to work through the I-9 process. Contractors would essentially be forced to check all employees because any of them might be assigned to federal contracts, according to Larry Lorber, a partner at Proskauer Rose in Washington.

In the E-Verify system, new-hire information from I-9 forms is electronically compared with Social Security and DHS databases.

Employer groups criticize E-Verify for being inaccurate, inefficient and unable to detect identity theft. They argue that the 4.1 percent error rate in the Social Security database could lead to millions of people being incorrectly ruled ineligible for work. Supporters say that the system confirms 96 percent of queries instantly and has an error rate of less than 1 percent.

The E-Verify regulation is one of many promulgated at the end of the Bush administration that the White House wants to reassess. E-Verify policy is further complicated by the fact that the system is up for renewal.

At the end of the last Congress, the House and Senate agreed to extend it only until March 6. A provision in the House economic recovery bill requires that companies receiving stimulus money sign up for E-Verify.

Although that measure may not survive a conference committee, it gives the Obama administration another reason to pause.

“They’ve got to see what happens legislatively,” Lorber says.

It’s not clear yet what approach Obama will take toward worksite enforcement. As the former governor of Arizona, Napolitano has had her own experiences with E-Verify. The system is mandatory for companies operating in the state.

Eric Bord, a partner at Morgan Lewis & Bockius in Washington, foresees Napolitano concentrating on “egregious violations” of the law, such as transporting illegal workers, forging work documents and maintaining “sweat shop” working conditions.

“I don’t expect her to take steps that would undercut or reduce the footprint of E-Verify,” Bord says.

Unlike her predecessor, Michael Chertoff, Napolitano has had to respond to constituents who use E-Verify.

“She understands the complexity of the issue from dealing with it on the state level,” Hammer says.

Although it will take a while for Congress and the Obama administration to sort out E-Verify policy, Bord says companies should prepare for its expansion.

“Prudent employers should be exploring ways to automate and improve existing I-9 procedures,” Bord says. “They should view this as a legal compliance obligation and not as one more HR administrative function.”

—Mark Schoeff Jr.

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HR software giant SAP has joined the ranks of companies cutting jobs amid the deepening recession.

Walldorf, Germany-based SAP on Wednesday, January 28, said it planned to trim 3,000 employees, or about 6 percent of its global workforce, by the end of the year.

SAP and archrival Oracle are the two biggest sellers of software to manage human resources tasks such as payroll and recruiting. Asked how the cuts will affect SAP’s HR software business, company spokeswoman Lindsey Held said SAP had no “specific group targets” or percentages. “We can say only that the actions will be global,” Held said in a statement Thursday, January 29. “We are examining our business operations to take prudent actions.”

SAP is the latest major firm to announce significant job cuts in recent weeks. Others include software maker Microsoft, equipment manufacturer Caterpillar and imaging specialist Eastman Kodak Co.

The economic downturn has led a record number of people to seek jobless benefits. For the week ending January 17, continued claims—that is, the number of people requesting a weekly benefit check after having established eligibility—was 4.78 million. The figure is the highest on record dating back to 1967.

HR software has been among the fastest-growing categories of business software, but it is unclear how spending is holding up amid the recession. SAP is not the first vendor of HR applications to cut jobs. Waltham, Massachusetts-based Authoria said last year that it cut an unspecified number of positions. In addition, an equity analyst wrote late last year of job cuts at vendor SuccessFactors.

SuccessFactors declined to comment.

SAP announced its workforce reduction as it disclosed revenue growth of 13 percent and a 2 percent drop in net income for 2008. The company also said it will continue tight cost controls on variable expenses and capital expenditures.

SAP expects the job cuts to provide $388 million to $453 million in annual cost savings beginning in 2010.

“We believe the cost containment measures will allow us to adapt to the tough market conditions and ensure the long-term competitiveness of the company,” Léo Apotheker, co-CEO of SAP, said in a statement. “Moreover, we expect 2009 to be a year of limited visibility, making it increasingly difficult to project sales in this environment.”

Apart from the headcount cut disclosed Wednesday, SAP eliminated slightly more than 200 positions in the U.S. and Canada in December and earlier this month, Held said. She said those cuts stemmed from SAP’s integration of Business Objects, a software firm it acquired early last year.

SAP rival Oracle did not immediately respond to a question about whether it might cut jobs because of the recession. As of November 30, Oracle had 86,657 employees, up from 79,649 a year earlier.

—Ed Frauenheim

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Employees’ 2008 401(k) plan account balances surrendered investment gains earned during the bull market of the past few years and fell to their lowest level since 2002, according to a study released Wednesday, January 28.

Last year, the average 401(k) account balance was $50,200, down 27 percent from $69,200 in 2007, according to the study by Fidelity Investments, a Boston-based mutual fund provider and 401(k) plan administrator. Last year’s 27 percent decline in the value of the average account balance was the biggest year-to-year decrease since Fidelity began to collect such statistics in 1999.

With the fall in the equities markets, participants have been shifting away from investing in stock. In 2008, 16 percent of participants held all of their 401(k) account balances in equities, down from 20 percent in 2007 and 37 percent in 2000.

Contrary to popular perception, the slump in the economy has not led to a surge of loans or withdrawals from 401(k) plans. Last year, 9 percent of participants took out loans, down from 9.7 percent in 2007.

In addition, 1.8 percent of participants took hardship withdrawals in 2008, up slightly from 1.6 percent in 2007.

The study is based on an analysis of the account balances of the more than 11 million employees in 17,095 corporate plans serviced by Fidelity.

A summary is available at www.fidelity.com.

(For a related story, read “House Democrats Contemplate Abolishing 401(k) Tax Breaks.”)

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

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Bonuses for Wall Street employees plummeted last year to the lowest level since 2004 as investment houses struggled to mend battered balance sheets and fees for underwriting and merger advice dwindled.

Cash bonuses paid by securities firms to their New York City employees fell 44 percent in 2008 to an estimated $18.4 billion, compared with about $33 billion a year earlier, according to a report issued by New York Comptroller Thomas A. DiNapoli.

Financial industry job losses helped boost average bonus sizes, which declined 36.7 percent to $112,000 per employee, Napoli’s office reported. The number of New Yorkers employed by the securities industry shrank by 19,200, or about a tenth, during 2008.

Many top Wall Street executives have said they would forgo their 2008 bonuses. In fact, the government’s bailout of the financial industry places some restrictions on executive compensation. But no such caps exist for lower-ranking employees.

Which doesn’t mean they’re happy with what they got. An online survey of finance employees by eFinancialCareers.com, a Wall Street jobs Web site, found that 46 percent of those polled were dissatisfied with their 2008 bonus.

A slightly larger proportion of the survey’s respondents said they received a smaller bonus last year than in 2007, but those who reported larger bonuses saw a relatively small increase on average. Conversely, those who got less saw declines between 31 percent and 50 percent, the site said.

With losses mounting and share prices swooning, perhaps Wall Streeters should be glad to get anything at all. Worldwide, banks, brokerages and insurance companies have written down more than $1 trillion worth of toxic investments since 2007, according to data compiled by Bloomberg. With mergers and securities underwriting slumping and initial public offerings in a deep freeze, many banks have seen fee income shrivel as well.

The crisis has remade New York City’s financial sector. Bear Stearns and Merrill Lynch were taken over by rivals, Lehman Brothers filed for bankruptcy, and Goldman Sachs and Morgan Stanley converted themselves into commercial banks. After receiving $45 billion in capital injections under the Troubled Assets Repurchase Program, Citigroup now counts the U.S. government as its biggest shareholder.

DiNapoli predicted in a statement that this year will also be a difficult one for Wall Street.

“The securities industry has already lost tens of thousands of jobs and the industry is still continuing to write off toxic assets,” he said. “It’s painfully obvious that 2009 will probably be another difficult year for the industry.”

Filed by Tim Catts of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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It’s too early to tell whether Lilly Ledbetter will join the pantheon of historic civil rights figures. But at a ceremony in the East Room of the White House on Thursday, January 29, she became the symbol of how President Barack Obama intends to put employees at the center of workplace policy.

The first piece of legislation that Obama signed into law was a bill named after Ledbetter that would make it easier for workers to sue for pay discrimination.

Obama called the bill “a simple fix to ensure fundamental fairness for American workers.” He said that women are “losing thousands of dollars in salary income and retirement savings” because of pay inequities.

“In this economy, when so many folks are already working harder for less and struggling to get by, the last thing they can afford is losing part of each month’s paycheck to simple and plain discrimination,” Obama said.

Ledbetter, a former supervisor at a Goodyear Tire & Rubber plant in Alabama, entered the ornate hall alongside Obama to applause from a large audience that included more than two dozen bipartisan members of Congress.

Under the Lilly Ledbetter Fair Pay Act, the statute of limitations would run 180 days from each paycheck that is diminished by discrimination. Two years ago, in a case involving Ledbetter, the Supreme Court ruled that a plaintiff must file a suit within 180 days of the original discriminatory act.

Now each pay stub will be considered a separate violation. Workers could collect two years of back pay from the time a suit was filed.

Opponents say the new law eviscerates the statute of limitations, potentially subjecting businesses to costly lawsuits over decades-old compensation decisions involving people who may no longer work at the company. In addition, pensions based on unfair pay may come into question.

“These are the kind of disputes you have to solve quite promptly, otherwise the employer’s ability to defend will dissipate very quickly,” said Neal Mollen, a partner with Paul Hastings in Washington.

Supporters say the bill reverses a controversial 5-4 Supreme Court decision in 2007. Ledbetter alleged that she was paid less than male counterparts for 20 years. She said she didn’t realize the pay discrepancy existed until a colleague placed an anonymous note in her mailbox many years later. She filed her claim in 1998.

Stuart Ishimaru, the chairman of the Equal Employment Opportunity Commission, said the Ledbetter bill simply reinstates the statute of limitations in pay disputes that had been in place before the Supreme Court ruling. The agency receives 5,000 wage dispute filings annually. Ishimaru was appointed chairman by Obama.

“The [Ledbetter law] is a victory for working women and all workers across the country who are shortchanged by receiving unequal pay for performing equal work,” Ishimaru said in a statement. “The EEOC intends to enhance enforcement in this area, in addition to increasing public outreach and education.”

The House passed the Ledbetter bill in 2007, but it was killed by a Senate filibuster in 2008. This year, a larger Democratic majority ensured Senate approval on January 22. The House originally passed the Ledbetter bill on January 9 and had to approve it again January 27 for procedural reasons.

For Obama, the Alabama grandmother is a touchstone for equality. She campaigned with Obama last fall at events designed to highlight women’s issues.

“There are no second-class citizens in our workplaces,” Obama said. “Ultimately, equal pay isn’t just an economic issue for millions of Americans … it’s a question of who we are—and whether we’re truly living up to our ideals.”

But experts say the law could sharply increase litigation and compliance costs for companies. In the latter area, a premium will be placed on keeping track of pay decision details.

“In an ideal world, an employer would figure out how to keep those records forever,” said Andy Tanick, a partner at Ford & Harrison in Minneapolis. “In the real world, they’ll have to do the best they can to keep records as long as they reasonably can.”

In criticizing the law, one employment lawyer says that it could reassure HR departments that they will be in demand even in a declining economy.

“This will put an enormous burden on HR professionals,” said Mollen. Executives are “going to look to HR managers to reconstruct why employee A got [a] 4 percent [raise] and employee B got 3 percent.”

Those calculations won’t apply to Ledbetter, who will not be able to recover back pay or damages from Goodyear. But she will be immortalized by the eponymous legislation.

And she can take back to Alabama one of several pens Obama used to make it a law.

“To watch him sign a bill that bears my name, a bill that will help women and others fight pay discrimination in the workplace is truly overwhelming,” Ledbetter said at a White House reception, according to a press pool report.

—Mark Schoeff Jr.

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The United Auto Workers has agreed to let General Motors terminate its Jobs Bank, providing the automaker with the same bailout concession made to Chrysler last week, GM confirmed Wednesday, January 28.

Starting Monday, February 2, the 1,600 GM workers now in the Jobs Bank must go on state unemployment and GM-funded supplemental benefits, said GM spokesman Tony Sapienza.

The combined unemployment and supplemental pay represents about 72 percent of standard weekly wages. The Jobs Bank represents nearly 100 percent.

The government made elimination of the Jobs Bank a condition for about $17.4 billion in rescue loans approved for GM and Chrysler last month.

The money-saving changes had to be negotiated with the UAW. Last week, the union let Chrysler shift its Jobs Bank workers onto unemployment and supplemental pay.

GM and Chrysler must show labor and debt restructuring by February 17, when the government will begin a review of their viability.

Ford executives say they also are interested in getting the same labor savings from the UAW as GM and Chrysler. Ford spokeswoman Marcey Evans would not comment on specific discussions with the UAW.

Sapienza said GM is also discussing supplemental pay with the union as part of current negotiations. Sen. Bob Corker, R-Tennessee, criticized the provision repeatedly when the automakers faced Congress for the loans late last year.

Filed by David Barkholz of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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A federal subsidy to help laid-off workers extend their employer health care passed the House on Wednesday, January 28, as part of the $819 billion economic stimulus bill. One item, however, has employers in an uproar.

That is a provision making employers responsible for extending health coverage permanently to former employees 55 or older or those who worked for the company for at least 10 years.

And unlike the measure to make it cheaper for workers to extend employer health care under the federal law known as COBRA, this provision would be permanent.

Lobbyists for employers are leading an intensifying campaign to remove the measure, which does not exist in the bill before the Senate, from any bill that eventually goes to President Barack Obama for signing.

“We recognize people are hurting and that people are laid off, but we don’t like the idea of continuing COBRA coverage to provide health care coverage to everyone,” said Mark Ugoretz, president of the ERISA Industry Committee.

Obama is hoping to sign the economic stimulus bill by Presidents Day, February 16.

With support in both chambers, it is likely that Congress will pass the provision for the federal government to pay 65 percent of the total cost of a laid-off worker’s health care premium. The law would apply to workers involuntarily terminated between September 1, 2008, and December 31, 2009.

That means employers could have as little as two weeks to make the necessary administrative changes to be able to comply with the law by the time health care coverage decisions take effect, as they normally do, at the beginning of each month.

The mechanics of complying with the law appear to be straightforward: An involuntarily terminated employee who chooses to extend coverage would pay 35 percent of the total cost of his or her health insurance; the employer would cover the rest. Employers would then deduct that amount from the payroll taxes the company wires to the Internal Revenue Service the following pay period.

“The good news is that companies immediately get their money back,” said Susan Relland, an attorney with Miller & Chevalier in Washington.

But she said employers “need to be paying attention now and start thinking about this now.”

Relland said employers could have 60 days to send a notice to eligible former employees of their option to extend their health insurance at a subsidized rate. Laid-off workers would then have 60 days to decide.

The provision that has angered employers calls for businesses to extend COBRA coverage to any employee who has been with a company at least 10 years or who is 55 or older. Those former employees would have access to an employer plan until they are eligible for Medicare at 65.

Employers would not have to pay for any part of the premium, but they worry that such a law would appeal only to former employees who have serious health concerns—and often high health care costs—that make it prohibitively expensive to find coverage on the individual market.

“You are basically building an engine for greater employee health costs,” Ugoretz said.

Supporters of the measure, introduced by Rep. Pete Stark, D-California, argued that it is a bridge to Medicare meant to help older workers, especially low-skilled workers in manufacturing, who may have a hard time quickly finding another job with health benefits.

Employer groups sent a letter of protest to congressional members last week. Those who signed the letter included the Corporate Health Care Coalition, ERISA Industry Committee, HR Policy Association, National Association of Manufacturers, National Association of Wholesaler-Distributors, National Retail Federation and U.S. Chamber of Commerce.

The Senate is expected to vote on the economic stimulus bill next week.

—Jeremy Smerd

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It’s appropriate that in February we would observe American Heart Month, with the Wellness Council of America reminding employers to make sure that employees “are heart smart and heart healthy.” But the nonprofit council, which aims to help improve the health of working Americans, points out that employers can make employees aware of other conditions and issues as well. For instance, National Donor Day occurs this month, and it’s also National Wise Health Consumer Month and National Cancer Prevention Month. Employers can see the entire list at http://www.welcoa.org/observances/february.php, which includes resources, Web sites and contact information for such organizations as the American Heart Association and the M.D. Anderson Cancer Center.

President Barack Obama will soon be able to fulfill a campaign promise by signing a pay discrimination bill into law that was passed by the House on Tuesday, January 27, in a 250-177 vote.

The measure, known as the Lilly Ledbetter Fair Pay Act, would make it easier for workers to sue for pay inequities.

The House acted on a bill the Senate approved January 22. The House originally passed the measure as part of a larger pay discrimination package January 9. But the Senate acted only on the Ledbetter portion, which necessitated another House vote.

Obama and first lady Michelle Obama made the Ledbetter bill a centerpiece of campaign events designed to highlight women’s issues.

Under the legislation, each paycheck that has been diminished by discrimination is a separate violation of civil rights law. The statute of limitations for filing a suit would run 180 days from each paycheck. A worker could recover two years of back pay.

Opponents argue that the bill eviscerates the statute of limitations, potentially subjecting businesses to lawsuits over pay decisions that date back decades at a time when they are trying to cope with the recession. 

Supporters say that the bill overturns a 2007 Supreme Court decision. Ledbetter, a former supervisor at a Goodyear Tire & Rubber plant in Alabama, sued the company for paying her less than her male counterparts for 20 years.

The court held, 5-4, that Ledbetter should have filed her claim within 180 days of the initial discriminatory decision rather than nearly two decades later. She said she didn’t realize the pay discrepancy existed until a colleague placed an anonymous note in her mailbox many years later.

Justice Ruth Bader Ginsburg, in a strong dissent, asserted that the court majority did not understand workplace realities, such as silence about pay levels. She urged Congress to overturn the ruling.

The Ledbetter bill was originally introduced in 2007 and approved by the House that year. It was blocked by a Senate filibuster in 2008.

But after the election, Senate Democrats increased their majority from 51 to 58, with one seat still undecided. That margin allowed them to easily move the bill.

Tuesday’s House vote fell mostly along partisan lines. Democrats touted the Ledbetter bill as way to bolster the concept of equal pay for equal work.

“It’s fundamental to the values of our country,” said Rep. George Miller, D-California and chairman of the House Education and Labor Committee. “It’s basic to our economy. In far too many workplaces, that is not what’s done.”

His counterpart, Rep. Howard “Buck” McKeon, R-California and ranking member of the labor committee, criticized Democrats for sending the Ledbetter bill straight to the House floor rather than putting it through the committee process.

McKeon said that the GOP did not have a chance to make changes to the bill. No amendments were allowed during the floor debate.

“This is a major fundamental change of civil rights law affecting … four statues,” McKeon said. “There has not been a full and fair debate.”

Miller dismissed Republicans as apologists for businesses that are trying to cut corners through unfair compensation. He said Ledbetter critics believe that “somehow women should underwrite these tough economic times” by suffering pay discrimination.

The Ledbetter measure was one of two bills included in the original House legislation. The other was the Paycheck Fairness Act, which would allow unlimited punitive and compensatory damages in wage suits and force businesses to prove that pay differences are based on factors other than sex.

The Senate has put off consideration of the paycheck bill, which was written by Rep. Rosa DeLauro, D-Connecticut. She said that the effort to address unfair pay would continue.

“That process starts in earnest with the Lilly Ledbetter Fair Pay Act,” DeLauro said. “I urge the Senate to build on this foundation.”

—Mark Schoeff Jr.

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