Author: Site Staff

Employers can’t deny permanent total disability benefits for illegal immigrants on the basis that their immigration status would prevent them working in the U.S. legally, a state appeals court ruled.

In the ruling Friday, December 12, Illinois’ 1st Judicial District Appellate Court also said it agreed with appeals courts across several other states that “have almost uniformly held” that the Immigration Reform and Control Act of 1986 does not preclude awarding workers’ comp benefits to illegal immigrants.

The case of Economy Packing Co. v. Illinois Workers’ Compensation Commission dealt with Ramona Navarro, a Mexican national who slipped and injured herself in May 2002 while working on an assembly line, court records state.

An arbitrator awarded her temporary total disability benefits of $147 per week for 60 weeks and permanent total disability benefits of $371 per week for life. The arbitrator also ruled Navarro to be an “odd-lot” worker, meaning she is permanently and totally disabled and her limited skills would prevent her from finding future work.

The Illinois Workers’ Compensation Commission and a trial court agreed, and Economy appealed. The employer argued that “undocumented aliens” are always unemployable because of immigration law regardless of their physical capabilities.

In order to receive permanent total disability benefits under an odd-lot theory, Navarro therefore needed to prove that she is not employable because of age, training, education or experience, Economy argued.

The appeals court disagreed.

It found that although immigration law prevents Navarro from legally working in the U.S., she would still be able to work elsewhere had she not sustained an injury on the job.

It also found that an employer has the burden of producing “sufficient evidence that suitable jobs would be regularly and continuously available to the undocumented alien but for her legal inability to obtain employment.”

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

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A group of local small-business owners who won a court victory in November that could have lowered the cost of their workers’ compensation insurance are likely to have their win tempered by the Ohio General Assembly.

State Rep. William Batchelder of Medina, chairman of the House insurance committee, told Crain’s Cleveland Business on Thursday, December 11, that he expects to pass during the current lame-duck session of the General Assembly legislation that would give the Ohio Bureau of Workers’ Compensation breathing room to make the changes directed by the Cuyahoga County Common Pleas Court decision.

“Legislatively, we may have to do something to provide more time,” Batchelder said. But he added that he basically supports the idea of changing the system to reduce the rate shock some employers have seen.

Judge Richard McMonagle on November 18 ordered the bureau to change the way it sets rates for worker injury insurance by July 1, 2009. His decision said the current rate-setting policy violates the intent of the Legislature.

The ruling in a class-action lawsuit was on a request for a preliminary injunction to force the Bureau of Workers’ Compensation to change immediately the way it sets rates and to recover past overcharges.
 
Regardless of what the Legislature does, the small-business owners expect to continue their class-action suit to trial. Attorney James DeRoche said small businesses statewide might be entitled to as much as $1.5 billion from the bureau because of past overpayments.

The issue pits two factions of small businesses against each other. One set of employers, which brought the lawsuit, saw their workers’ comp premiums rise—in some cases astronomically—after they made claims. It is this group that has brought the class-action suit.

The others have been able to keep premiums low by joining groups composed largely of employers with unblemished claims records. The groups, managed by organizations such as the National Federation of Independent Businesses and chambers of commerce, have been getting discounts from the Bureau of Workers’ Compensation of as much as 90 percent below base rates.

Because the bureau must balance what it brings in from premiums against what it pays out in claims, if it gives some employers a discount, it must offset that with higher rates to other employers. And it is usually employers that are kicked out of a group after having a claim that see the steepest increases in rates.

Aladdin Baking Co. of Cleveland saw its premiums rise to $55,000 a year from $12,000 after it was dropped from its group in 2006 because two of its 48 employees were injured on the job, according to executive vice president Connie Nahra.

McMonagle said in his ruling, “The discounts given to group employers are unlawful, and should not be relied upon as to what employers should actually be paying in premiums.”

Batchelder acknowledged that the system in place for nearly two decades is unfair and needs to be fixed as soon as possible.

“I share their pain,” he said of the plight of the business owners who filed the suit.

He said the Bureau of Workers’ Compensation has told him it may need 2½ years to bring rates back into balance. “I don’t think so,” he said.

Filed by Jay Miller of Crain’s Cleveland Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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According to a new survey by Dice Holdings, the New York-based tech career firm that runs Dice.com, 72 percent of tech companies questioned said the current economic environment has caused them to scale back hiring plans for the next six months.

That’s up from 53 percent in June. And almost half of tech companies surveyed, 48 percent, said layoffs are likely in the next six months, compared with just 32 percent in June.

“Given how tight the labor market still is for technology professionals, it is not surprising to see it ease along with the economic retrenchment,” said Tom Silver, Dice’s chief marketing officer, in a statement.

Last month, Dice reported that the number of job postings on its site fell 20 percent compared with last year.

Job cuts are also expected to affect tech salaries. Some 53 percent of hiring managers and recruiters surveyed by Dice said they expect flat salaries, and 27 percent anticipate lower salaries for new hires this year.

While the recent Dice.com survey is nationwide, New York-based tech firms have recently slashed staff. Razorfish, Microsoft’s interactive agency; Thumbplay, a mobile entertainment provider; and Heavy.com, a male-oriented entertainment site, are among the New York companies that have laid off workers in the past few months.

Filed by Amanda Fung of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Filed by Amanda Fung of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Mumbai ranked second to Jerusalem on a list of the most dangerous places for outsourcing—even before the recent terrorist attacks plunged the city into chaos.

In fact, India had two regions ranked among the top five most dangerous places for outsourcing, according to a survey of 448 corporate development and outsourcing destination specialists conducted by Black Book Research and Brown-Wilson Group. The survey ranked 50 of the largest established and emerging offshore locations—from the safest to most dangerous—based on threat of terrorism, crime, climate hazards, and other factors (locations in the U.S. and the U.K. were excluded).

The results were not overly surprising. Jerusalem, Mumbai, Rio de Janeiro/Sao Paulo (Brazil), Manila/Cebu/Makati (Philippines) and Delhi/Noida/Gurgaon (India) were ranked as the most dangerous places for outsourcing in the report.

The safest outsourcing locales? Singapore, followed by Dublin (Ireland), Santiago (Chile), Krakow/Warsaw (Poland) and Toronto (Canada).

The terror attacks in Mumbai, along with the prospect that President-elect Barack Obama could follow through with policies that could penalize outsourcers with tax disincentives, have many U.S. corporate executives rethinking their offshore outsourcing strategies.

That could spell trouble for several outsourcing locations, particularly India. U.S. companies alone are expected to spend around $25 billion this year on IT outsourcing contracts with vendors on the subcontinent.

Study authors Doug Brown and Scott Wilson noted that the risks involved with many offshore locations may begin influencing corporate decisions to outsource to vendors at home or in locations that are closer to home.

“Outsourcing buyers are now keenly aware they can no longer justify offshore cost savings where their business continuity is in jeopardy,” they noted.

The Most Dangerous 10
1. Jerusalem (Israel)
2. Mumbai (India)
3. Rio de Janeiro/Sao Paulo (Brazil)
4. Manila/Cebu/Makati (Philippines)
5. Delhi/ Noida/Gurgaon (India)
6. Kingston (Jamaica)
7. Kuala Lumpur (Malaysia)
8. Johannesburg (South Africa)
9. Bangkok (Thailand)
10. Bogota (Colombia)

The Safest 10
1. Singapore
2. Dublin (Ireland)
3. Santiago (Chile)
4. Krakow/Warsaw (Poland)
5. Toronto (Canada)
6. Prague/Brno (Czech Republic)
7. Budapest (Hungary)
8. Monterrey (Mexico)
9. Beijing (China)
10. Cairo (Egypt)

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

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A day after launching a Web site for his 2009 mayoral campaign, city comptroller William Thompson unveiled a dismal economic forecast for the city he hopes to run.

Thompson raised his estimate of job losses through 2010 by 5,000 to 170,000 jobs and predicted the city’s unemployment rate will reach 7.4 percent, the highest level since April 2004.

He said Wall Street cash bonuses, which totaled $33.2 billion last year, will decline by at least 50 percent to the lowest level since 2002. The hemorrhaging of jobs and bonuses will contribute to an estimated 4.3 percent drop in New York City tax revenues in fiscal year 2009, he said.

“While the city’s labor and real estate markets outperformed the nation for most of 2008, the toll taken by the financial industry makes this one of the grimmest economic periods for the city in many years,” Thompson said.

Indeed, the city is starting to catch up with the rest of the country, the report says. Job growth in the city continued well after the housing and financial crises had caused significant losses across the nation, but recently, this growth has slowed to a trickle and many sectors are laying off workers.

“During the past several months a negative trend has become unmistakable,” the report said.

Total private sector jobs were up almost a full percent for the first 10 months of 2008. Private payroll jobs in January 2008 were more than 50,000 above the previous year, but that number has been steadily declining. By October, the year-over-year increase had fallen to just 5,300 above 2007 levels. Employment had declined in several professional and business services sectors, and in the arts, entertainment and recreation, but the biggest drop was in financial activities, where year-over-year employment fell more than 13,000.

Another report released Thursday, December 11, by the Fiscal Policy Institute, painted a similarly bleak picture. That report predicted unemployment could reach 8.5 percent in the city by the end of next year, with the rate for blacks hitting 14 percent and Hispanics reaching 10 percent. Overall, the number of unemployed in the city will rise by 120,000 in the next year, the report said.

The city’s unemployment rate, currently at 5.7 percent, is one percent lower than that of the nation’s, but that will soon change, said James Parrott, an economist with the Fiscal Policy Institute.

“We’re going to catch up to the national downturn very quickly over the next few months,” he said. “People should be prepared for things to get worse quickly.”

The Fiscal Policy report showed that less than a third of the city’s jobless receive unemployment benefits, well below the national average. That leaves many without a safety net, Parrott said.

Thompson hopes that the public works package proposed by President-elect Barack Obama will soften the blow to the city. He singled out Penn Station as a project that could employ thousands of New Yorkers and beef up the city’s decaying infrastructure.

But even with a federal stimulus, the city faces deep cuts. Just Wednesday, Mayor Michael Bloomberg ordered all agencies to slash spending by 7 percent in the next fiscal year to save the city $1.4 billion. That was on top of a 2.5 percent cut this fiscal year and a 5 percent cut next year that had been previously announced.

The dire budget news hasn’t dissuaded Thompson from his plans to run for mayor. Wednesday, he unveiled his Web site, http://thompson2009.com, underscoring his commitment to run despite Bloomberg’s presence in the race.

Filed by Daniel Massey of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Companies seeking relief from increased pension obligations have cleared two hurdles with unanimous passage of a bill in the Senate in the early evening of Thursday, December 11, and in the House the night before.

Now the legislation must overcome White House resistance to be signed into law. When the bill came up in the Senate during the lame-duck session in November, the Bush administration said it would undermine protections ushered in by a major pension reform bill in 2006.

The relief bill eases the rules contained in the Pension Protection Act of 2006. The first overhaul of pension law since 1974, it significantly tightened defined-benefit funding rules and required companies to meet 100 percent of their obligations within seven years.

The measure, which went into effect this year, was a response to a series of huge airline and steel company pension defaults that sent the government pension insurer’s deficit soaring.

Under the bill Congress approved Thursday, pension plans would be allowed to smooth unexpected asset losses over 24 months. Treasury Department regulations to implement the pension law essentially would have applied mark-to-market rules.

The smoothing, however, cannot allow a pension plan to vary by more than 10 percent of its fair market value. Corporate representatives say many companies need a wider “corridor.”

The measure would allow plan sponsors more time to achieve 100 percent funding and to use their funded status as of January 1, 2008, to determine whether their plans are at risk and have to be frozen.

The bill also waives for 2009 the requirement that people take a minimum amount out of their 401(k) funds each year when they reach age 70½.

“We’ve made pension plan requirements responsive to the needs of America’s seniors and employers, and I believe this bill is a solid effort to move the economy toward recovery,” said Sen. Max Baucus, D-Montana and chairman of the Senate Finance Committee, in a statement.

Business groups representing hundreds of corporations have been pressing Congress for weeks for a break on pension obligations. They assert that money companies sink into the plans could otherwise be used for investment and job creation to help pull the economy out of the recession.

Advocates are urging President Bush to sign the bill. Jason Hammersla, director of communications at the American Benefits Council, says the White House has been silent on the bill this week.

“The fact that they haven’t released a statement of administration policy is a good sign,” Hammersla said. “We are hopeful.”

A recent study by consulting firm Mercer shows that November was the second consecutive month of record pension fund losses for large companies. As of the end of last month, a $60 billion surplus at the beginning of the year for S&P 1,500 companies had collapsed into a $280 billion deficit.

The Bush administration, which was a champion of the 2006 pension reform law, opposes modifying its provisions. The Pension Benefit Guaranty Corp., the government pension insurer, estimated that reduced pension contributions would add $3 billion to the agency’s approximately $14 billion deficit.

The White House also asserts that higher pension contributions aren’t required until September 2010. In a response to the administration, the benefits council said that companies would have to significantly increase funding this April to avoid benefit restrictions.

Without relief, “there will very likely be massive plan freezes, widespread job loss, and, in some cases, company bankruptcies, as well as a deepening of the recession,” the council wrote in a letter to Capitol Hill leaders.

If Bush doesn’t sign the bill now, “there will be employers that make [funding] decisions based on current law,” said Jan Jacobson, senior counsel for retirement policy at the benefits council. “Some of those decisions may involve plan freezes and layoffs in order to have the money necessary for their funding obligations.”

A House leader on pension reform emphasized that the bill would not undermine the 2006 law.

It gives “employers more time to fund the pension promises to their workers,” Rep. Earl Pomeroy, D-North Dakota, said in a statement. “It does not change the obligations employers have in pension plans, but instead provides appropriate relief in light of the unprecedented volatility in the markets.”

But a couple business groups say that the relief bill doesn’t go far enough and that many companies will need more help next year. Mark Ugoretz, president of the ERISA Industry Committee, asserts that the measure fails to give a break for plans that have to sharply increase their pension payments because they’re less than 80 percent funded.

“Ultimately, the bill does not provide adequate relief, falling short of addressing or even reflecting the dramatic downturn in the markets,” Ugoretz said in a statement.

—Mark Schoeff Jr.

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The Supreme Court may be poised to revisit an issue similar to one that caused a controversial ruling in 2007—whether a worker can sue for a discriminatory act that occurred decades before.

The previous case involved Lilly Ledbetter, a tire factory supervisor from Alabama who sued her employer, Goodyear, for more than 20 years’ worth of paying her less than men who held an equivalent job.

The court decided 5-4 that her suit fell outside the statute of limitations, which requires a worker to take action within 180 days of the original discriminatory act.

In a case the court heard Wednesday, December 10, former AT&T employees are suing the company for not crediting them with maternity leave that they took in the late 1960s through the mid-1970s, before the passage of an anti-pregnancy discrimination law.

Noreen Hulteen, who retired after being laid off in 1994, says her pension benefits have been reduced because 210 days of her pregnancy leave were defined by AT&T as personal leave that did not count toward seniority. AT&T only gave her credit for 30 days.

In 1978, Congress amended the Title VII anti-discrimination law by passing the Pregnancy Discrimination Act, which requires that women exiting the workforce for pregnancy continue to receive benefits just like their colleagues who take other kinds of disability leave. After that law passed, AT&T amended its leave policies to comply.

A district court ruled in favor of Hulteen, essentially endorsing her position that AT&T retroactively violated Title VII. AT&T appealed to the 9th Circuit Court of Appeals, where a three-judge panel reversed the district court’s decision.

But after Hulteen and her colleagues asked for a rehearing before the entire 9th Circuit, the court upheld the district court. It did so in part by holding that AT&T’s original policy was not lawful. AT&T then took the dispute to the Supreme Court.

In his presentation before the court on December 10, AT&T’s attorney argued that the company should not be held liable for the pregnancy leave it had in place during the Nixon administration.

“What we did at the time, in our judgment, was perfectly legal,” said Carter Phillips.

He also asserted that AT&T shouldn’t have to defend itself against stale claims based on business decisions that were made a generation ago.

But Justice Ruth Bader Ginsburg said that the former AT&T workers didn’t take action because they didn’t feel the impact of their lost work time.

“They wouldn’t be hurt until they sought retirement or sought some other benefit that increased seniority would give them,” she said.

The women knew immediately that they would only get 30 days credit for their pregnancy leave, Phillips countered.

“I think the average person told that they have less seniority today than they had yesterday … would say, ‘I am entitled to go to court today,’ ” Phillips said.

Phillips argued that pension payments today don’t constitute continuing pregnancy discrimination, citing the court’s decision in the Ledbetter case that each of her paychecks was not a pay violation.

“This is more like the present effects of past allegedly discriminatory acts and, therefore, not actionable at this time,” Phillips said.

Hulteen’s lawyer, Kevin Russell, argued that AT&T is liable today for the results of its pre-1979 pregnancy policies because they have resulted in mothers receiving less in pension payments than others who worked the same amount of time.

“It facially discriminates on the basis of pregnancy and then does so whether the pregnancy discrimination was unlawful at the time or not,” Russell said. “And under [Title VII] … to discriminate on the basis of pregnancy is carried forward today in every possible application.”

Several justices wrestled with the argument that a policy that was once lawful could have an illegal effect today.

“I guess I’ve never heard of a case where it’s OK to … discriminate intentionally, but it’s illegal if that has a disparate impact,” said Chief Justice John Roberts Jr.

Justice Anthony Kennedy expressed concern about how much changing its pension system would cost AT&T.

Russell contended that the price might be millions of dollars but that was an insignificant amount in the scope of AT&T’s pension plan, which recently had a $17 billion surplus.

“That’s a small amount of money … millions of dollars?” Kennedy asked.

The case is AT&T Corp. v. Hulteen, Docket No. 07-543.

—Mark Schoeff Jr.

More U.S. workers are taking steps to lower their medical costs and are unwilling to pay higher health care premiums, according to a Watson Wyatt Worldwide survey released Wednesday, December 10.

Citing the recent economic crisis and rising health care costs, Washington-based Watson Wyatt said 19 percent of employees surveyed were willing to pay more money out of their paycheck in order to keep health costs down. Last year, 38 percent of employees were willing to pay higher premiums.

The survey of nearly 2,500 employees of large U.S. companies conducted in May and June also found that nearly half of the respondents had chosen a lower-cost drug option in the past year. In addition, more employees delayed visiting a doctor until they had serious symptoms, and an increasing number of workers talked with their doctors about seeking more affordable treatments.

However, the survey also found that some workers are taking actions that could lead to higher medical costs, including skipping doctor’s appointments altogether and doses of medicine and avoiding filling prescriptions.

As workers continue to look for ways to save money, “employers stand to gain from reinforcing messages on preventive care, wellness resources and the importance of following prescribed drug regimens,” said Cathy Tripp, national leader of consumerism at Watson Wyatt, in a statement.

The full report, the 2008 Employee Perspectives on Health Care can be found at www.watsonwyatt.com/employeeperspectives.

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

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Most employers will have to “sharply reduce their work forces, freeze plans, and curtail other benefits such as 401(k) contributions, as well as other business spending” if federal lawmakers fail to approve legislation to ease pension funding requirements this year, according to a letter sent Monday, December 8, by the ERISA Industry Committee to all members of Congress.

“Without immediate congressional action, prudent plan sponsors will have to assume that they will be making dramatically increased pension contributions next year and will retrench to pay for or offset those contributions accordingly,” said the letter, signed by ERISA Industry Committee president Mark Ugoretz.

The ERISA Industry Committee, which represents major employer and other pension industry lobbying groups, is concerned that the severe downturn in the economy this year has led to the underfunding of many pension plans. The group wants lawmakers to approve legislation that would give the plans temporary relief from provisions in the Pension Protection Act of 2006 that will phase in full funding requirements during the next several years.

Filed by Doug Halonen of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Two years after Hewitt Associates announced that legacy client BP was not going to renew its HR business process outsourcing contract, the London-based energy company has reversed its decision and re-signed.

Hewitt inherited the $600 million BP contract when it purchased Exult in 2004. At the time it was the biggest HR BPO contract of its kind, covering payroll, relocation severance and benefits administration for BP’s 100,000 employees globally.

But in 2006, Hewitt’s HR BPO business was struggling as the provider was having troubles implementing all of the deals that it and Exult had signed.

In a December 2006 earnings call, Hewitt CEO Russ Fradin announced that BP wouldn’t be renewing the contract. The companies signed a two-year renewal while BP looked for a new provider, but that search was unsuccessful, according to a source familiar with the discussions. Now, BP has returned to Hewitt.

Under the terms of the agreement, Hewitt will deliver “a range of HR services” to BP employees around the world, BP spokesman David Nichols said. Officials at BP and Hewitt would not disclose which processes and geographies are included in the contract or discuss the length of the deal. However, the source familiar with the discussions said the new contract will be scaled down from the original agreement.

“It’s going to be core HR processes,” the source said. “All of the expat admin and recruitment has been brought back in-house.”

For Hewitt, winning back BP is a huge vote of confidence, particularly given the difficulties the firm has had on the HR BPO side in the past couple years, observers say.

“This is a significant boost for Hewitt’s HR BPO business and it signifies better times for them,” said Phil Fersht, an analyst at AMR Research. BP’s decision also is evidence that the cost to switch HR BPO providers for a large deal like this is too much for the company to absorb, he said.

Mike Wright, HRO sales and product development leader at Hewitt, declined to comment on the specifics of the BP deal, but he said that Hewitt is actively looking to close HR BPO deals.

“We are working very hard to find more clients and close more deals,” he said. “That is part of our plan for ’09.”

—Jessica Marquez

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